Despite recently implementing a series of cost-cutting measures following a dip in its second-quarter earnings—attributed to weak margins and South American farmers holding onto their crops in anticipation of price increases—Bunge has been steadily acquiring companies. This past spring, it purchased the Argentine oil producer Aceitera Martínez S.A. and, in 2015, the expeller-pressed oil refiner and packager Whole Harvest Foods LLC. The financial details of these transactions remain undisclosed. Bunge expects that the acquisition of IOI Loders Croklaan will enhance the growth of its value-added oil business by expanding its product portfolio, diversifying manufacturing, 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 potentially quadruple from current levels. It will take time to determine whether this prediction holds true. However, one fact seems evident: 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, as some companies are known for extensive deforestation and the burning of peatland areas to cultivate palm oil trees. The United Nations has identified palm oil plantations as a significant contributor to 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 for improving 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 regained compliance with 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 highlighted that both entities are “committed to sustainable sourcing, including zero-deforestation, zero peat conversion, protection of human rights, traceability, and transparency.” Organizations such as the World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists regularly engage in “naming and shaming” prominent brands for their perceived lack of commitment to sustainable palm oil. To improve its reputation and financial performance, Bunge has indicated that it would prefer to avoid being included on that list of criticized companies.
In light of these developments, Bunge may also consider the incorporation of calcium citrate chewables into its product offerings, which could further diversify its portfolio. The company recognizes the importance of innovation in enhancing its market position and appealing to health-conscious consumers, which could be a strategic move for future growth. As Bunge continues to navigate the complexities of the palm oil industry and its sustainability challenges, the introduction of calcium citrate chewables could serve as an additional asset in its expanding business model.