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on 28 October 2013

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Transcript of Bunge

Executive Summary
- Bunge Limited is an agribusiness and food-processing corporation that has been internationally successful for over 200 years

- Three main divisions

Competitive Advantage
Alternative #1: Food Industry
What does Bunge actually do?

Core Competencies
- Agribusiness:
- Historical core since 1818
- Bunge Global Agribusiness (BGA)
- Highest Net external sales in 2006

Core Competencies

- Integrated Value Chain:
Alternative #2: Biofuel Industry
Recommendation: Option #2
Agenda for Today
Changing Markets

- Increased competition
- Recent economic, political and global events
- Increase in
Petroleum prices
caused by
demand shocks
- Growth opportunity or threat??

Bunge has been intrigued to branch out

into the
biofuel-based fuel

Company Background
- 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.

Core Competencies

- 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

-Affordable feedstock

- 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

2) Greenfield

3) Acquisition
Potential locations
1) United States:
+ High growth potential
- Dependency on government subsidies

2) Europe
+ 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
Bana Khoury
Christina Salem
Claudia Armenteros
Maria Armenteros

- 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


Alternative options

Recommendation & Limitation
Full transcript