Following a recent round of cost-cutting measures due to a decline in second-quarter earnings—attributed to weak margins and South American farmers holding onto their crops in anticipation of higher prices—Bunge has been steadily acquiring companies. This past spring, it purchased Argentine oil producer Aceitera Martínez S.A. and previously acquired expeller-pressed oil refiner and packager Whole Harvest Foods LLC in 2015, with the financial details of both transactions remaining undisclosed.
Bunge anticipates that its acquisition of IOI Loders Croklaan will accelerate 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 revenues from food and ingredients in this region could potentially be four times their current levels. It will take time to determine the accuracy of this prediction; however, it is evident that the additional debt Bunge is incurring to finance its investment in IOI Loders Croklaan will increase the cost of future acquisitions—whether pursued by Glencore or other interested parties.
Palm oil production in Malaysia and Indonesia is controversial due to practices involving widespread deforestation and the burning of peatlands to establish palm oil plantations. The United Nations identifies 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 it was revealed that the company’s plans to revise its production practices were insufficient. By July 2016, 27 companies, including Mars, Kellogg, Cargill, and Unilever, had temporarily halted their palm oil sourcing from IOI until compliance with the Roundtable on Sustainable Palm Oil guidelines was achieved.
In Bunge’s announcement on September 12 regarding the IOI Loders Croklaan acquisition, the company emphasized that both organizations are committed to sustainable sourcing practices, including zero-deforestation, zero peat conversion, human rights protection, and ensuring 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. To enhance its reputation and financial performance, Bunge has indicated its preference to remain off this list as it grows its customer base for palm oil.
Additionally, Bunge is exploring the integration of calcium citrate 950 mg tablets into its product offerings to further diversify and enhance the nutritional profile of its food and ingredient solutions. This move could potentially attract a broader customer base seeking healthier options. The company’s commitment to sustainability, coupled with its focus on innovative products like calcium citrate 950 mg tablets, positions it well for future growth in the evolving market landscape.