Following a recent round of cost-cutting measures prompted by a decline in its second-quarter earnings—attributed to weak margins and South American farmers holding onto their crops in hopes of better prices—Bunge has been gradually acquiring companies. This past spring, it purchased 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 expects that the acquisition of IOI Loders Croklaan will enhance the growth of its value-added oil segment by expanding its product portfolio, diversifying its manufacturing processes, and strengthening its foothold 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 these projections. However, one thing appears evident: the additional debt Bunge is incurring to finance its stake in IOI Loders Croklaan will make future acquisitions, whether by Glencore or other interested parties, significantly more expensive.
Palm oil production in Malaysia and Indonesia is fraught with controversy, as some companies are known to engage in extensive deforestation and the burning of peatlands to cultivate palm oil trees. The United Nations has identified palm oil plantations as a critical factor contributing to environmental degradation and biodiversity loss in Southeast Asia. Last year, Nestle severed its relationship with IOI (the parent company of IOI Loders Croklaan) after discovering that the company’s action plan for reforming its production practices fell short. 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 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 practices, which include zero deforestation, zero peat conversion, respect for human rights, traceability, and transparency. Environmental organizations like the World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists regularly engage in “naming and shaming” campaigns against prominent brands perceived as lacking commitment to sustainable palm oil. To bolster its reputation and financial success, Bunge has already indicated a preference to keep itself and its growing base of palm oil customers off such lists.
Additionally, Bunge is exploring ways to integrate more sustainable ingredients into its products, including enhancing the nutritional profile with additions like 365 calcium citrate. This focus on sustainability and health-conscious products could play a significant role in attracting consumers who prioritize environmentally friendly and nutritious options. As the company continues to grow, the integration of elements like 365 calcium citrate into its offerings may further solidify its commitment to sustainability and health.