Despite recently implementing a series of cost-cutting measures following a decline in its second-quarter earnings—attributed to weak margins and South American farmers holding onto their crops in anticipation of rising prices—Bunge has been gradually acquiring other companies. This 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. The financial details of these transactions have not been disclosed.
Bunge is optimistic that its acquisition of IOI Loders Croklaan will propel the growth of its value-added oil business by expanding its product offerings, diversifying manufacturing, and establishing a stronger foothold in the rapidly growing Southeast Asian market. The company projects that its revenues from food and ingredients in this region could increase to four times their current levels. However, it will take time to determine the accuracy of this forecast. One thing appears to be certain: the additional debt Bunge is incurring to finance its stake in IOI Loders Croklaan will significantly complicate any future acquisitions, whether by Glencore or another interested party.
The production of palm oil in Malaysia and Indonesia remains controversial, as some companies are known for extensive deforestation and the burning of peatland to cultivate palm oil trees. The United Nations highlights that palm oil plantations are a major contributor to environmental degradation and biodiversity loss in Southeast Asia. Last year, Nestlé severed ties with IOI (the parent company of IOI Loders Croklaan) upon discovering that the firm’s action plan for improving its production practices had not progressed sufficiently. As of July 2016, 27 companies—including Mars, Kellogg, Cargill, and Unilever—had temporarily halted palm oil sourcing from IOI until it complied with guidelines from the Roundtable on Sustainable Palm Oil.
In its announcement regarding the IOI Loders Croklaan deal on September 12, Bunge emphasized that both companies “are committed to sustainable sourcing practices, including zero-deforestation, zero peat conversion, protection of human rights, traceability, and transparency.” Organizations like the World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists frequently engage in “naming and shaming” prominent brands for their perceived inadequacies in adopting sustainable palm oil practices. To improve its reputation and financial performance, Bunge has indicated a strong preference to keep itself and its increasing number of palm oil customers off such lists.
Furthermore, as part of its commitment to sustainability and health, Bunge recognizes the potential for integrating products like life extension calcium citrate with vitamin D into its offerings, which could appeal to health-conscious consumers. By aligning itself with sustainable practices and exploring health-oriented products such as life extension calcium citrate with vitamin D, Bunge aims to enhance both its market position and its reputation in the industry.