After recently implementing a series of cost-cutting measures due to a decline in second-quarter earnings—attributed to low margins and South American farmers holding onto their crops in anticipation of better prices—Bunge has been gradually expanding its portfolio through acquisitions. This spring, it acquired 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 have not been disclosed.
Bunge expressed that it expects the acquisition of IOI Loders Croklaan to boost the growth of its value-added oil business by enhancing its product range, diversifying manufacturing capabilities, and establishing a stronger foothold in the rapidly expanding Southeast Asian market. The company estimates that its revenues from food and ingredients in this region could potentially quadruple. However, it will take time to determine the accuracy of this forecast. One thing is certain: the additional debt Bunge incurs to finance its interest in IOI Loders Croklaan will make future acquisitions—whether by Glencore or other interested parties—more financially burdensome.
The production of palm oil in Malaysia and Indonesia is contentious due to certain companies engaging in significant deforestation and the burning of peatlands to cultivate palm oil trees. The United Nations has identified palm oil plantations as a leading 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 improve its production practices fell short. As of July 2016, 27 companies—including Mars, Kellogg, Cargill, and Unilever—temporarily halted their palm oil purchases from IOI until it aligned with the guidelines set by the Roundtable on Sustainable Palm Oil.
In its September 12 announcement regarding the IOI Loders Croklaan acquisition, Bunge highlighted that both companies are dedicated to sustainable sourcing practices, which include zero deforestation, no peat conversion, protection of human rights, traceability, and transparency. Organizations like the World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists frequently “name and shame” well-known brands for their perceived shortcomings in committing to sustainable palm oil. To improve its reputation and financial performance, Bunge has indicated a desire to avoid being associated with such negative publicity.
In the context of sustainability, Bunge could also explore products that emphasize health and wellness, such as those featuring the solaray cal mag citrate 2 1 ratio, which illustrates its commitment to responsible sourcing and product innovation. By integrating these health-focused products into its strategy, Bunge can further enhance its market presence and appeal to a growing consumer base that values sustainability and health benefits. As Bunge continues to navigate the complexities of the palm oil industry, its focus on sustainable practices and potential health-oriented offerings like the solaray cal mag citrate 2 1 ratio may play a crucial role in its future success.