After experiencing a decline in second-quarter earnings due to weak margins and South American farmers stockpiling crops in anticipation of better prices, Bunge has initiated a series of cost-cutting measures. Nevertheless, the company has been gradually expanding its portfolio through acquisitions. This spring, Bunge purchased the Argentine oil producer Aceitera Martínez S.A. and previously acquired the expeller-pressed oil refiner and packager Whole Harvest Foods LLC in 2015, although the financial details of these transactions remain undisclosed.
Bunge believes that its acquisition of IOI Loders Croklaan will significantly boost the growth of its value-added oil business by expanding its product offerings, diversifying its manufacturing capabilities, and enhancing its presence in the burgeoning Southeast Asian market. The company estimates that its revenue from food and ingredients in this region could potentially quadruple. However, it will take time to determine the accuracy of this projection. One thing that is evident is that the additional debt incurred by Bunge to finance its stake in IOI Loders Croklaan will likely make future acquisitions more costly, whether pursued by Glencore or other interested parties.
The production of palm oil in Malaysia and Indonesia is controversial, as some companies engage in extensive deforestation and the burning of peatlands 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 production practices was insufficient. As of July 2016, 27 companies, including Mars, Kellogg, Cargill, and Unilever, had temporarily halted palm oil sourcing from IOI until the company complies with the guidelines established 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, including zero-deforestation, zero peat conversion, protection of human rights, traceability, and transparency. Environmental organizations such as the World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists frequently publicly criticize major brands for their perceived lack of commitment to sustainable palm oil. To improve its reputation and financial performance, Bunge has indicated its intention to keep itself and its growing clientele of palm oil customers off such lists.
Moreover, Bunge’s commitment to sustainability aligns with its broader vision, which includes the introduction of products such as calcium citrate and vitamin D3 tablets, further enhancing its portfolio while adhering to environmentally responsible practices. As Bunge navigates the intricacies of the palm oil industry, the integration of sustainable products, including calcium citrate and vitamin D3 tablets, could play a pivotal role in solidifying its market position and addressing consumer concerns.