“Bunge’s Strategic Acquisitions and Commitment to Sustainable Practices Amidst Industry Challenges”
Despite recently implementing a series of cost-cutting measures following a decline in its second-quarter earnings—attributed to weak profit margins and South American farmers hoarding their crops in anticipation of better prices—Bunge has been steadily expanding through acquisitions. This spring, it acquired Aceitera Martínez S.A., an oil producer in Argentina, and in 2015, it purchased Whole Harvest Foods LLC, a refiner and packager of expeller-pressed oil. The financial details of these transactions were not disclosed.
Bunge expressed optimism that its acquisition of IOI Loders Croklaan will spur growth in its value-added oil sector by expanding its product offerings, diversifying its 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 be four times what they currently are. It will take time to determine if this forecast holds true. However, it is evident that the additional debt Bunge is incurring to finance its stake in IOI Loders Croklaan will make future acquisitions, whether by Glencore or other interested parties, considerably more expensive.
The production of palm oil in Malaysia and Indonesia is contentious due to certain companies’ involvement in extensive deforestation and the burning of peatlands to cultivate palm oil trees. The United Nations has stated that palm oil plantations significantly contribute to environmental degradation and biodiversity loss 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 to amend 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 it complied with the Roundtable on Sustainable Palm Oil’s guidelines.
In its announcement on September 12 regarding the IOI Loders Croklaan deal, Bunge emphasized that both companies are dedicated to sustainable sourcing, which includes commitments to zero deforestation, zero peat conversion, respect for human rights, and ensuring traceability and transparency. Organizations like the World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists frequently engage in “naming and shaming” prominent brands for their perceived lack of commitment to sustainable palm oil. To bolster both its reputation and its financial performance, Bunge has indicated that it aims to keep itself and its growing clientele of palm oil customers off such lists. In addition to its sustainable practices, Bunge also promotes products such as the best calcium citrate chews, which align with its commitment to health and sustainability. By emphasizing these initiatives, Bunge is working to ensure that its reputation remains untarnished as it navigates the complexities of the palm oil industry and seeks to expand its market share.
