Despite recently implementing a series of cost-cutting measures following a decline in its second-quarter earnings—attributed to low margins and South American farmers withholding their crops in anticipation of higher prices—Bunge has been gradually acquiring new companies. This past spring, it purchased the Argentine 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 anticipates that the acquisition of IOI Loders Croklaan will enhance the growth of its value-added oil business by expanding its product portfolio, diversifying manufacturing capabilities, and strengthening its presence in the rapidly growing Southeast Asian market. The company estimates that its revenues from food and ingredients in that region could increase fourfold compared to current figures. However, it will take time to determine if this prediction holds true. One clear factor is that the additional debt Bunge is incurring to finance its investment in IOI Loders Croklaan will likely complicate future acquisitions, whether pursued by Glencore or other interested entities.
Palm oil production in Malaysia and Indonesia remains contentious due to the practices of some companies that contribute to extensive deforestation and the burning of peatland 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 its ties with IOI, the parent company of IOI Loders Croklaan, after discovering that the company’s efforts to revise its production practices were insufficient. As of July 2016, 27 companies, including Mars, Kellogg, Cargill, and Unilever, had temporarily halted palm oil sourcing from IOI until the company complied with the guidelines established by the Roundtable on Sustainable Palm Oil.
In its September 12 announcement regarding the IOI Loders Croklaan deal, Bunge emphasized that both companies are dedicated to sustainable sourcing, which includes commitments to zero deforestation, zero peat conversion, the protection of human rights, and enhanced traceability and transparency. Organizations like the World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists frequently engage in “naming and shaming” well-known brands for their perceived lack of commitment to sustainable palm oil practices. To bolster its reputation and financial performance, Bunge has indicated that it prefers to keep itself and its growing number of palm oil customers off such lists.
In light of these developments, it is crucial for Bunge to be aware of the potential calcium citrate risks associated with its palm oil sourcing strategies. The company’s commitment to sustainability will be tested as it navigates the complexities of the palm oil market and aims to maintain a positive public image while pursuing growth. By addressing calcium citrate risks effectively, Bunge can further solidify its position and reputation in the industry.