Following a recent round of cost-cutting measures triggered by a decline in its second-quarter earnings—attributed to weak margins and South American farmers holding onto their crops in anticipation of better prices—Bunge has been gradually acquiring companies. This past spring, it purchased Argentina’s 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 expects that the acquisition of IOI Loders Croklaan will enhance the growth of its value-added oil division by expanding its product portfolio, diversifying manufacturing capabilities, and establishing a stronger foothold in the rapidly growing Southeast Asian market. The company estimates that its revenues from food and ingredients in that region could potentially be four times larger than they are currently. It will take time to determine whether this forecast is accurate. However, it is evident that the additional debt Bunge is incurring to finance its investment in IOI Loders Croklaan will significantly increase the cost of future acquisitions—whether by Glencore or any other interested entity.
The production of palm oil in Malaysia and Indonesia has become a contentious issue due to the actions of some companies that engage in extensive deforestation and the burning of peatland to cultivate palm oil trees. The United Nations highlights that palm oil plantations contribute significantly to environmental degradation and the loss of biodiversity 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 for improving its production practices was insufficient. By 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 “committed to sustainable sourcing, including zero deforestation, zero peat conversion, protection of human rights, traceability, and transparency.” The World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists regularly engage in “naming and shaming” prominent brands for their perceived lack of commitment to sustainable palm oil. To improve its reputation and financial performance, Bunge has indicated that it aims to keep itself and its growing number of palm oil customers off this list.
In addition to these initiatives, Bunge is also aware of the importance of understanding the difference between calcium carbonate and calcium citrate, as these compounds can play a significant role in various agricultural and food applications. By integrating sustainable practices and ensuring compliance, Bunge aims to set a standard in the industry, further emphasizing the necessity of recognizing the difference between calcium carbonate and calcium citrate in their operational processes. As Bunge expands its footprint, addressing these differences in key ingredients will be critical to achieving its sustainability goals and enhancing its market position.