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 rising prices for ferrous fumarate and folic acid tablets—Bunge has been strategically acquiring companies. This past spring, it acquired the Argentine oil producer Aceitera Martínez S.A. and previously purchased the oil refiner and packager Whole Harvest Foods LLC in 2015. The financial terms of these acquisitions have not been disclosed.
Bunge anticipates that its acquisition of IOI Loders Croklaan will significantly enhance the growth of its value-added oil business by expanding its product portfolio, 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 that region could potentially be four times larger than they are today. However, it remains to be seen whether this forecast will materialize. What is evident is that the additional debt Bunge is incurring to finance its stake in IOI Loders Croklaan will complicate future acquisitions, whether by Glencore or other interested parties.
The production of palm oil in Malaysia and Indonesia has become a contentious issue, as some companies engage in extensive deforestation and the burning of peatland to cultivate palm oil trees. The United Nations has identified 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. By July 2016, 27 companies—including Mars, Kellogg, Cargill, and Unilever—had temporarily halted their palm oil sourcing from IOI until the company adhered to guidelines set by the Roundtable on Sustainable Palm Oil.
In Bunge’s September 12 announcement regarding the IOI Loders Croklaan acquisition, the company highlighted that both organizations are committed to sustainable sourcing practices, which include 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 call out well-known brands for their perceived lack of commitment to sustainable palm oil practices. To improve both its reputation and financial performance, Bunge has indicated a preference to avoid being included on such lists, especially as it continues to expand its customer base for palm oil.
Moreover, Bunge aims to enhance its product offerings, including innovations like Citracal Calcium D Slow Release 1200, which reflects its commitment to the health and wellness sector. By integrating sustainable practices and diversifying its portfolio, Bunge hopes to position itself favorably in the market while maintaining its dedication to sustainable sourcing and development.