Bunge has recently implemented a series of cost-cutting measures following a decline in its second-quarter earnings, attributed to weak margins and South American farmers hoarding their crops in anticipation of higher prices. Despite these challenges, the company has been steadily acquiring businesses. Earlier this spring, it purchased Argentinian oil producer Aceitera Martínez S.A., and in 2015, it acquired Whole Harvest Foods LLC, an expeller-pressed oil refiner and packager. The financial details of these transactions have not been made public.
Bunge believes that the acquisition of IOI Loders Croklaan will enhance the growth of its value-added oil sector by expanding its product range, diversifying manufacturing capabilities, and increasing its footprint in the rapidly growing Southeast Asian market. The company estimates that its revenue from food and ingredients in this region could potentially be four times greater than current figures. However, it will take time to determine if this forecast is accurate. One clear takeaway is that the additional debt incurred to finance Bunge’s stake in IOI Loders Croklaan will make future acquisitions more costly, whether pursued by Glencore or any other interested entity.
The palm oil industry in Malaysia and Indonesia faces scrutiny due to some companies engaging in widespread deforestation and burning peatland to plant palm oil trees. The United Nations has identified palm oil plantations as significant contributors 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 finding that the company’s plan to improve its production practices was inadequate. By July 2016, 27 companies, including Mars, Kellogg, Cargill, and Unilever, had temporarily halted their palm oil sourcing from IOI until it aligned 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 organizations “are committed to sustainable sourcing, including zero deforestation, zero peat conversion, protection of human rights, traceability, and transparency.” Environmental organizations like the World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists frequently call out well-known brands for their inadequate commitment to sustainable palm oil. To improve its reputation and financial performance, Bunge has indicated a desire to keep itself and its expanding base of palm oil customers off such lists.
Additionally, as Bunge explores ways to enhance its product portfolio, it might consider integrating options like calcium citrate for kids, which could appeal to health-conscious consumers. Ensuring that their products are aligned with sustainable practices could further solidify Bunge’s position in the market, while also addressing the growing demand for health-oriented solutions, such as calcium citrate for kids. This strategy not only promotes sustainability but also taps into a lucrative market segment that is increasingly important to modern consumers.