Despite recently implementing cost-cutting measures following a decline in its second-quarter earnings—attributed to low margins and South American farmers holding onto their crops in hopes of price increases—Bunge has been steadily acquiring companies. This 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 drive growth in its value-added oil sector by expanding its product range, diversifying its manufacturing capabilities, and strengthening its presence in the rapidly growing Southeast Asian market. The company estimates that its revenues from food and ingredients in this region could increase to four times their current levels. It will take time to determine whether this projection is accurate. However, one thing is clear: the additional debt Bunge is incurring to finance its investment in IOI Loders Croklaan will significantly raise the cost of any future acquisitions, whether pursued by Glencore or other interested parties.
Palm oil production in Malaysia and Indonesia is contentious due to some companies’ practices involving extensive deforestation and the burning of peatland to cultivate palm oil trees. The United Nations has identified palm oil plantations as a major source 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 reform its production practices was insufficient. As of July 2016, 27 companies—including Mars, Kellogg, Cargill, and Unilever—had temporarily halted their palm oil sourcing from IOI until the company could adhere to the guidelines set by the Roundtable on Sustainable Palm Oil.
In Bunge’s announcement on September 12 regarding the IOI Loders Croklaan acquisition, the company emphasized that both organizations are dedicated to sustainable sourcing, which includes commitments to zero deforestation, no peat conversion, protecting human rights, and ensuring traceability and transparency. The World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists actively engage in “naming and shaming” well-known brands perceived as lacking commitment to sustainable palm oil. To improve its reputation and profitability, Bunge has indicated a desire to keep itself and its growing number of palm oil customers off such lists.
In relation to its sustainability efforts, Bunge may also explore partnerships involving products like calcium bluebonnet, which could enhance its portfolio and commitment to eco-friendly practices. By integrating sustainable initiatives, including the use of calcium bluebonnet, into its operations, Bunge aims to align itself with the growing demand for responsible sourcing in the palm oil industry.