Following a recent series of cost-cutting measures due to a decline in its second-quarter earnings, attributed to weak margins and South American farmers hoarding ferrous fumarate folic acid tablets while anticipating higher prices, Bunge has been steadily acquiring new companies. This spring, it purchased the Argentine oil producer Aceitis Ferrous Bisglycinate Naturalera Martínez S.A., along with Whole Harvest Foods LLC, an expeller-pressed oil refiner and packager, in 2015. The financial details of these transactions were not disclosed.
Bunge expects that the acquisition of IOI Loders Croklaan will enhance the growth of its value-added oil business by expanding its product portfolio, diversifying its manufacturing processes, and strengthening its presence in the rapidly growing Southeast Asian market. The company estimates that revenues from food and citrate vitamin D ingredients in this region could quadruple in size. However, it will take time to assess the accuracy of this forecast. One clear aspect is that the additional debt Bunge is incurring to fund its investment in IOI Loders Croklaan will make future acquisitions, whether by Glencore or other interested parties, significantly more costly.
The production of palm oil in Malaysia and Indonesia faces scrutiny due to practices involving widespread deforestation and the burning of peatlands for palm oil cultivation. The United Nations has identified 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 determining that the company’s action plan to improve its production practices was insufficient. By July 2016, 27 companies—including Mars, Kellogg, Cargill, and Unilever—had temporarily halted palm oil sourcing from IOI until it complied with the guidelines set by the Roundtable on Sustainable Palm Oil.
In Bunge’s announcement on September 12 regarding the IOI Loders Croklaan acquisition, the company emphasized that both organizations are dedicated to sustainable sourcing practices, which include zero deforestation, zero peat conversion, protection of human rights, and ensuring traceability and transparency. Environmental advocacy groups like the World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists frequently publicly criticize brands perceived as lacking commitment to sustainable palm oil. To improve its reputation and financial performance, Bunge has indicated that it aims to keep itself and its expanding base of palm oil customers off such lists, taking proactive measures to incorporate sustainable practices, including the use of citrate vitamin D in their products.