Following a recent round of cost-cutting measures due to a decline in second-quarter earnings—attributed to weak margins and South American farmers withholding their crops in anticipation of higher prices—Bunge has been gradually acquiring companies. This past spring, it purchased Aceitera Martínez S.A., an oil producer in Argentina, and previously acquired Whole Harvest Foods LLC, a producer and packager of expeller-pressed oil, in 2015. The financial details of these transactions were not disclosed.
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 revenue from food and ingredients in this region could increase to four times its current level. Time will reveal whether this projection is accurate. However, it is evident that the additional debt Bunge is incurring to fund its investment in IOI Loders Croklaan will make any future acquisitions—whether by Glencore or other interested parties—more costly.
Palm oil production in Malaysia and Indonesia is contentious, as some firms are known to engage in significant deforestation and burning of peatland to cultivate palm oil trees. The United Nations highlights that palm oil plantations contribute significantly 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. By July 2016, 27 companies, including Mars, Kellogg, Cargill, and Unilever, had temporarily halted sourcing palm oil from IOI until it could comply with the standards 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 committed to sustainable sourcing practices, including zero deforestation, no peat conversion, human rights protection, traceability, and transparency. 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 improve both its reputation and financial performance, Bunge has indicated its desire to keep itself and its expanding customer base of palm oil users off that list.
Moreover, as Bunge continues to grow, it is exploring ways to integrate products such as calcium citrate zinc magnesium tablets into its offerings, as part of its commitment to health-conscious consumers. By doing so, Bunge aims to enhance its product portfolio and further solidify its market position while promoting sustainability in all aspects of its operations.