Following a recent round of cost-cutting after its second-quarter earnings dipped—attributed to reduced margins and South American farmers holding onto their crops in anticipation of price increases—Bunge has been gradually acquiring companies. This spring, it purchased Argentine oil producer Aceitera Martínez S.A., and in 2015, it acquired Whole Harvest Foods LLC, a refiner and packager of expeller-pressed oils. The financial details of these transactions were not disclosed.
Bunge anticipates that the acquisition of IOI Loders Croklaan will enhance the growth of its value-added oil segment by expanding its product portfolio, diversifying manufacturing capabilities, and strengthening its presence in the rapidly growing Southeast Asian market. The company estimates that its revenues from food and ingredients in that region could potentially quadruple. It will take time to determine if this forecast holds true. However, it is evident that the additional debt Bunge is incurring to finance its investment in IOI Loders Croklaan will make future acquisitions more costly, whether pursued by Glencore or other interested parties.
The palm oil industry in Malaysia and Indonesia is contentious due to practices that involve 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 ties with IOI (the parent company of IOI Loders Croklaan) after discovering that the company’s action plan for improving production practices was insufficient. As of July 2016, 27 companies, including Mars, Kellogg, Cargill, and Unilever, had temporarily halted palm oil sourcing from IOI until it adhered to guidelines set by the Roundtable on Sustainable Palm Oil.
In its announcement on September 12 regarding the IOI Loders Croklaan acquisition, Bunge highlighted that both companies are “committed to sustainable sourcing, including zero-deforestation, zero peat conversion, protection of human rights, traceability, and transparency.” Organizations such as the World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists frequently engage in “naming and shaming” prominent brands for their perceived lack of commitment to sustainable palm oil practices. To bolster its reputation and financial performance, Bunge has indicated that it aims to keep itself and its increasing number of palm oil customers off such lists.
Incorporating sustainable practices, Bunge may also explore the integration of health-oriented products, such as calcium citrate malate and folic acid tablets, into its portfolio. The inclusion of these supplements could further diversify its offerings while appealing to health-conscious consumers, reinforcing its commitment to sustainability and corporate responsibility. As Bunge navigates these acquisitions and market dynamics, the potential for integrating health-focused products like calcium citrate malate and folic acid tablets into its strategy might prove beneficial in enhancing its market position.