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Transcript of Bunge
- Bunge Limited is an agribusiness and food-processing corporation that has been internationally successful for over 200 years
- Three main divisions
Alternative #1: Food Industry
What does Bunge actually do?
- Historical core since 1818
- Bunge Global Agribusiness (BGA)
- Highest Net external sales in 2006
- Integrated Value Chain:
Alternative #2: Biofuel Industry
Recommendation: Option #2
Agenda for Today
- Increased competition
- Recent economic, political and global events
- Increase in
- Growth opportunity or threat??
Bunge has been intrigued to branch out
- Founded in 1818 to merchandize grains and imports from the Dutch colonies
- Went public in 2001 after 180 years of being private
- Stated Mission: “ To enhance the lives by improving the global food and agribusiness production chain”
- Helps farmers access the world market
- Processes and sells these agricultural commodities
- Ships oil to deficient nations AND the meals to places that need it to grow animal livestock
- Deals in branded, differentiated, packaged products with food processors, food services and retail customers.
- Organizational Structure:
- "Integration and decentralization"
- Strong culture based on shared values
- Fertilizer Industry:
- Increasing Net Income
Increase of about 104%
- Potential markets:
- Soybeans in China
- Vegetable oil in India
- Palm oil in Malaysia
- Sugar in Brazil
- Further develop their R&D
- Volatility in rising petroleum prices
- Timing mismatch between the farmers and consumers
- Difficulty in estimating the world demand and import needs
- Increase investment in hedging methods & aquire nee skills
- Alternative and an additive to petroleum-based fuel.
- Growing demand for biofuel (including ethanol) which is a byproduct of part of Bunge's supply chain
- Used in transportation & machineries
- Cost saving & more environmentally friendly
- Attractive market: Brazil
Enter biofuel industry
Diversify Food Industry
- Diversify into a new industry
- Hedge against volatility in Petroleum prices
- Potential growth in a booming industry
- Manage competition
- Environmentally friendly alternative
- Cheapest production
-Land availability; 200 acres
- Independence of ethanol industry from government subsidies
- Bunge is already a major integrated fertilizer producer in Brazil
- Strong footprint owning 26% market share of NPK fertlizers
1) Joint venture
1) United States:
+ High growth potential
- Dependency on government subsidies
+ Acquired France based Cereol (largest oilseed processor)
- High legislation
3) Malaysia & Indonesia
+ Vast lands of production of Palm-Oil
- High political risk & instability
Bunge: Food, Fuel, and World Market
- Acquisition problems: inability to achieve synergy, integration problem & too much debt
- Further complications with the timing mismatch
- Difficulty in maintaining a decentralized but integrated supply chain
- Rising competition against rivals
- Uncertainty about new technologies of producing ethanol; using celluolosic biomass not food grains
- Externalities; climate, soil condition, farming practices
- Disagreement between senior executive positions
- Senior manager, Gwathemy : "at the end of the day, Bunge is a food company"
Executive summary & Company Background
Recommendation & Limitation