Despite recently implementing a series of cost-cutting measures following a decline in its second-quarter earnings—attributed to weak margins and South American farmers holding onto their crops in anticipation of better prices—Bunge has been gradually acquiring companies. This past spring, it purchased the Argentine oil producer Aceitera Martínez S.A. and acquired the expeller-pressed oil refiner and packager Whole Harvest Foods LLC back in 2015. The financial details of these transactions were not disclosed.
Bunge indicated that the acquisition of IOI Loders Croklaan is expected to boost the growth of its value-added oil segment by expanding its product range, diversifying its production capabilities, and establishing a stronger foothold in the rapidly growing Southeast Asian market. The company estimates that its revenue from food and ingredients in this region could potentially quadruple from current levels. However, it will take time to determine whether this projection holds true. One thing appears certain: the additional debt Bunge is incurring to finance its stake in IOI Loders Croklaan will make any future acquisitions—whether by Glencore or other interested parties—more expensive.
The production of palm oil in Malaysia and Indonesia has faced criticism, as some companies have been involved in extensive deforestation and the burning of peatland to cultivate palm oil trees. The United Nations identifies palm oil plantations as significant contributors to environmental degradation and biodiversity loss in Southeast Asia. Last year, Nestlé severed its ties with IOI (the parent company of IOI Loders Croklaan) upon discovering that the company’s action plan to amend its production practices was insufficient. As of July 2016, 27 companies—including Mars, Kellogg, Cargill, and Unilever—had temporarily halted their palm oil sourcing from IOI until it complied with the Roundtable on Sustainable Palm Oil guidelines.
In Bunge’s announcement on September 12 regarding the IOI Loders Croklaan acquisition, the company emphasized that both firms are dedicated to sustainable sourcing practices, including zero deforestation, zero peat conversion, human rights protection, and ensuring traceability and transparency. Organizations like the World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists regularly engage in “naming and shaming” well-known brands for their perceived lack of commitment to sustainable palm oil. To improve its reputation and financial performance, Bunge has already indicated a preference to remain off that list, especially as it continues to celebrate its partnerships, such as those involving products like calcium soft chews, which align with sustainable practices.