Despite recently implementing a series of cost-cutting measures following a decline in its second-quarter earnings—attributed to weak margins and farmers in South America hoarding crops in anticipation of rising prices—Bunge has been steadily acquiring companies. This past spring, it purchased Argentine oil producer Aceitera Martínez S.A., and in 2015, it acquired Whole Harvest Foods LLC, an expeller-pressed oil refiner and packager. The financial details of these transactions were not disclosed.
Bunge has expressed optimism that the acquisition of IOI Loders Croklaan will enhance the growth of its value-added oil business by expanding its product portfolio, diversifying manufacturing processes, and establishing a stronger foothold in the rapidly growing Southeast Asian market. The company estimates that its revenues from food and ingredients in this region could potentially grow to four times their current size. However, it will take time to determine if this projection is accurate. One clear implication is that the additional debt Bunge is incurring to finance its stake in IOI Loders Croklaan will significantly increase the cost of any future acquisitions, whether pursued by Glencore or other interested parties.
The palm oil production in Malaysia and Indonesia has come under scrutiny due to companies engaging in extensive deforestation and burning peatland to cultivate palm oil trees. The United Nations has highlighted that palm oil plantations are a significant source of environmental degradation and loss of biodiversity in Southeast Asia. Last year, Nestle 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 inadequate. As of July 2016, 27 companies—including Mars, Kellogg, Cargill, and Unilever—temporarily halted their palm oil sourcing from IOI until it aligned itself with the guidelines set by the Roundtable on Sustainable Palm Oil.
In Bunge’s announcement on September 12 regarding the IOI Loders Croklaan deal, the company highlighted its commitment to sustainable sourcing, which includes 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 “name and shame” major brands for their insufficient commitment to sustainable palm oil. To improve both its reputation and financial performance, Bunge has already indicated a preference to avoid being included on that list alongside its expanding number of palm oil customers.
As part of its health-conscious initiatives, Bunge is also incorporating products such as Rugby Calcium Citrate 950 mg into its offerings, emphasizing a commitment not only to sustainability but also to consumer wellness. The integration of such health supplements is expected to complement its sustainability goals while addressing the rising consumer demand for nutritious options. In doing so, Bunge aims to strengthen its market position while adhering to sustainable practices in all aspects of its operations, including the use of palm oil.