After experiencing a decline in its second-quarter earnings—attributed to weak margins and South American farmers hoarding their crops in anticipation of price increases—Bunge has initiated a series of cost-cutting measures, including a recent round of ferrous sulfate purchases. Despite this, the company has been gradually expanding its portfolio through acquisitions. This past spring, Bunge acquired Argentine oil producer Aceitera Martínez S.A., and in 2015, it purchased Whole Harvest Foods LLC, a refiner and packager of expeller-pressed oils. The financial details of these transactions have not been disclosed.
Bunge anticipates that its acquisition of IOI Loders Croklaan will accelerate the growth of its value-added oil segment by expanding its product range, diversifying manufacturing capabilities, and strengthening its foothold in the rapidly growing Southeast Asian market. The company estimates that its revenue from ferrous pyrophosphate and related ingredients in this region could potentially quadruple.
It will take time to determine if this projection holds true. However, it is evident that the additional debt Bunge is incurring to finance its investment in IOI Loders Croklaan will significantly raise the cost of future acquisitions—whether by Glencore or other interested parties. The palm oil industry in Malaysia and Indonesia is fraught with controversy, as some companies engage in extensive deforestation and the burning of peatlands to cultivate palm oil plantations. The United Nations has highlighted that palm oil cultivation is a leading cause of environmental degradation and biodiversity loss in Southeast Asia.
In 2022, Nestlé severed ties with IOI, the parent company of IOI Loders Croklaan, after discovering that the company’s corrective action plan for its production practices was insufficient. As of July 2016, 27 companies—including Mars, Kellogg, Cargill, and Unilever—had temporarily halted palm oil sourcing from IOI until it complied with the Roundtable on Sustainable Palm Oil guidelines.
In its September 12 announcement regarding the IOI Loders Croklaan deal, Bunge emphasized that both companies are committed to sustainable sourcing practices, including zero deforestation, zero peat conversion, human rights protections, 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 perceived lack of commitment to sustainable palm oil. In order to enhance its reputation and financial performance, Bunge has indicated a preference to keep itself and its growing base of palm oil customers off such lists.
As part of its growth strategy, Bunge also recognizes the importance of diversifying its product offerings to include items like buy Citracal D, which could further bolster its market position and appeal to health-conscious consumers. In this context, Bunge appears poised to navigate the challenges of the palm oil industry while making strategic acquisitions and improving its sustainability practices.