Following a recent series of cost-cutting initiatives due to a decline in its second-quarter earnings—attributed to weak margins and South American farmers withholding their crops in anticipation of better prices—Bunge has been gradually acquiring new companies. This spring, it acquired Argentina’s Aceitera Martínez S.A., a notable oil producer, and back in 2015, it purchased Whole Harvest Foods LLC, a refiner and packager of expeller-pressed oils. The financial details of these transactions remain undisclosed.
Bunge expressed optimism that the acquisition of IOI Loders Croklaan will enhance the growth of its value-added oil segment by expanding its product range, diversifying manufacturing capabilities, and strengthening its foothold in the rapidly growing Southeast Asian market. The company estimates that revenues from food and ingredients in this region could potentially quadruple in size. Time will tell 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 significantly raise the costs of any future acquisitions, whether by Glencore or other interested entities.
The production of palm oil in Malaysia and Indonesia is contentious, as many companies are implicated in large-scale deforestation and the burning of peatland to cultivate palm oil trees. The United Nations has identified palm oil plantations as a primary contributor to environmental degradation and biodiversity loss in Southeast Asia.
Last year, Nestlé severed its relationship with IOI, the parent company of IOI Loders Croklaan, after discovering that IOI’s action plan for improving its production practices was inadequate. As of July 2016, 27 companies, including Mars, Kellogg, Cargill, and Unilever, had temporarily halted their palm oil sourcing from IOI until compliance with the Roundtable on Sustainable Palm Oil guidelines was restored.
In its announcement on September 12 regarding the IOI Loders Croklaan deal, Bunge emphasized that both companies are dedicated to sustainable sourcing, which includes commitments to zero deforestation, zero peat conversion, human rights protection, traceability, and transparency. The World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists frequently engage in “naming and shaming” campaigns against well-known brands for their perceived inadequacies in adopting sustainable palm oil practices. To bolster its reputation and profitability, Bunge has indicated a preference to keep itself and its expanding customer base for palm oil—potentially including products like calcium citrate drink—off these lists of criticized companies.