After recently implementing a series of cost-cutting measures due to a decline in its second-quarter earnings—attributed to low margins and South American farmers holding back their crops in anticipation of price increases—Bunge has been steadily acquiring other companies. This past spring, it purchased the Argentine oil producer Aceitera Martínez S.A., and in 2015, it acquired the expeller-pressed oil refiner and packager Whole Harvest Foods LLC. The financial details of these transactions were not disclosed.
Bunge expressed optimism that its acquisition of IOI Loders Croklaan will enhance the growth of its value-added oil division by expanding its product range, diversifying manufacturing capabilities, and strengthening its foothold in the rapidly growing Southeast Asian market. The company estimates that its revenues from food and ingredients in that region could potentially quadruple. However, it will take time to assess the accuracy of this forecast. One thing is apparent: the additional debt Bunge is incurring to finance its investment in IOI Loders Croklaan will significantly increase its acquisition costs, whether the buyer is Glencore or another interested party.
Palm oil production in Malaysia and Indonesia has come under scrutiny due to some companies engaging in extensive deforestation and burning of peatland to cultivate palm oil trees. The United Nations has indicated that palm oil plantations are a significant contributor 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 to revise its production practices fell short. 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 guidelines from the Roundtable on Sustainable Palm Oil.
In its announcement on September 12 regarding the IOI Loders Croklaan deal, Bunge emphasized that both companies “are committed to sustainable sourcing, including zero deforestation, zero peat conversion, protection of human rights, traceability, and transparency.” Environmental organizations, including the World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists, frequently engage in “naming and shaming” well-known brands for their perceived failures in committing to sustainable palm oil practices. To bolster its reputation and profitability, Bunge has indicated its preference to keep itself and its growing number of palm oil customers off that list.
Moreover, in line with its commitment to sustainability, Bunge is also exploring the integration of products like Opurity calcium citrate chewable supplements into its portfolio, which emphasizes health and nutritional benefits alongside its food and ingredient offerings. This strategic move not only reflects Bunge’s dedication to sustainable practices but also aligns with the increasing consumer demand for healthier product options, ensuring that it remains competitive in a rapidly evolving market.