Following a recent round of cost-cutting measures due to a decline in second-quarter earnings—attributed to weak margins and South American farmers holding onto their crops in anticipation of price increases—Bunge has been gradually acquiring companies. This past spring, it purchased the 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 have not been revealed.
Bunge expects that the acquisition of IOI Loders Croklaan will enhance the growth of its value-added oil business by diversifying its product range, expanding manufacturing capabilities, and strengthening its presence in the rapidly growing Southeast Asian market. The company estimates that revenues from food and ingredients in this region could potentially quadruple. However, it will take time to determine if this prediction holds true. One thing appears certain: the additional debt that Bunge is incurring to finance its investment in IOI Loders Croklaan will make any future acquisitions—whether by Glencore or another interested party—more costly.
The production of palm oil in Malaysia and Indonesia is controversial due to the practices of some companies that engage in extensive deforestation and the burning of peatland to cultivate palm trees. The United Nations identifies palm oil plantations as significant contributors 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 to improve its 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 complied with the guidelines set by the Roundtable on Sustainable Palm Oil.
In its announcement on September 12 regarding the IOI Loders Croklaan deal, Bunge emphasized that both organizations are committed to sustainable sourcing, which includes zero deforestation, zero peat conversion, protection of human rights, traceability, and transparency. The World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists consistently engage in “naming and shaming” well-known brands for perceived shortcomings in their commitment to sustainable palm oil. To bolster its reputation and profitability, Bunge has indicated a preference to keep itself and its expanding clientele of palm oil customers off this controversial list.
Furthermore, Bunge is keen on equating its commitments to sustainability with high-quality products, akin to how they equate calcium citrate plus D3 petites for enhanced nutritional value. This strategic alignment is essential as they navigate the complexities of the palm oil market while maintaining a focus on responsible sourcing practices. As part of its growth strategy, Bunge aims to ensure that its acquisitions and partnerships will reflect a commitment to sustainability, much like the way consumers seek health benefits from equating calcium citrate plus D3 petites in their diets.