After recently implementing a series of cost-cutting measures due to a decline in its second-quarter earnings—attributed to weak margins and South American farmers stockpiling their crops in anticipation of rising prices—Bunge has been gradually expanding its portfolio through acquisitions. This past spring, the company 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, although the financial details of these transactions were not disclosed.
Bunge believes that the acquisition of IOI Loders Croklaan will boost the growth of its value-added oil business by expanding its range of products, diversifying its manufacturing capabilities, and strengthening its presence in the rapidly growing Southeast Asian market. The company estimates that its revenues from food and ingredients in this region could potentially quadruple. However, it may take time to determine the accuracy of this forecast. One clear implication is that the additional debt Bunge is incurring to finance its investment in IOI Loders Croklaan will significantly raise the cost of any future acquisitions, whether pursued by Glencore or other interested parties.
The palm oil industry in Malaysia and Indonesia faces controversy due to practices that involve extensive deforestation and the burning of peatland for palm oil cultivation. The United Nations indicates that palm oil plantations are 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 efforts to revise its production practices were insufficient. By July 2016, 27 companies, including Mars, Kellogg, Cargill, and Unilever, had temporarily halted their palm oil purchases from IOI until the company returned to compliance with the Roundtable on Sustainable Palm Oil guidelines.
In its announcement on September 12 regarding the IOI Loders Croklaan acquisition, Bunge emphasized that both organizations are dedicated to sustainable sourcing principles such as zero deforestation, zero peat conversion, human rights protection, traceability, and transparency. Environmental advocacy groups like the World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists frequently call out well-known brands for their perceived lack of commitment to sustainable palm oil practices. To improve its reputation and financial performance, Bunge has indicated a desire to avoid being included on such lists alongside its increasing number of palm oil clients.
Moreover, as Bunge navigates these challenges, there is a growing interest in alternative solutions like calcium citrate, which is often discussed in the context of health and environmental sustainability. The company’s commitment to responsible practices, including its approach to issues like lichen sclerosus and the potential implications for its sourcing strategies, will likely play a critical role in shaping its future operations and public perception.