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 withholding their crops in anticipation of higher prices—Bunge has been steadily acquiring companies. This past spring, it acquired the Argentine oil producer Aceitera Martínez S.A., and in 2015, it purchased the expeller-pressed oil refiner and packager Whole Harvest Foods LLC. 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 business by expanding its product portfolio, diversifying manufacturing, and strengthening its presence in the rapidly growing Southeast Asian market. The company estimates that its revenues from food and ingredients in this region could be four times larger than they are today. However, it will take time to determine if this prediction holds true. One thing seems certain: the additional debt Bunge is incurring to finance its stake in IOI Loders Croklaan will significantly increase the costs of any future acquisitions, whether by Glencore or another interested party.
Palm oil production in Malaysia and Indonesia is controversial due to the widespread deforestation and peatland burning associated with some companies to cultivate palm oil trees. The United Nations identifies palm oil plantations as a significant cause of 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 reform its production practices was insufficient. As of July 2016, 27 companies, including Mars, Kellogg, Cargill, and Unilever, had temporarily halted sourcing palm oil from IOI until it complied with the guidelines set by the Roundtable on Sustainable Palm Oil.
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, the protection of human rights, traceability, and transparency. The World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists often publicly criticize well-known brands for their perceived lack of commitment to sustainable palm oil. To improve its reputation and enhance profitability, Bunge has indicated its preference to keep itself and its increasing number of palm oil customers off that critical list.
In addition to its oil ventures, Bunge is also focusing on developing products such as calcium citrate malate equivalent to elemental calcium, which further diversifies its offerings. As Bunge continues to grow, the integration of sustainable practices alongside new product lines like calcium citrate malate equivalent to elemental calcium is crucial to its long-term strategy. Ultimately, Bunge’s commitment to sustainability and innovative product development, including calcium citrate malate equivalent to elemental calcium, could be pivotal in shaping its future in the competitive market landscape.