CEO of Bunge anticipates a growth phase.
Saint Louis — Gregory A. Heckman, chief executive officer of Bunge Ltd., stated that the company’s portfolio-reshaping phase “is really behind us” after making significant changes throughout 2019 and 2020. Bunge is better positioned fundamentally to succeed going forward and is more likely to purchase companies than to sell them.
He declared, “We’ve earned the right to grow.” “For the past year and a half, we have combined the performance several quarters in a row, and now we are beginning to look at growth.”
Mr. Heckman explained in detail the reasoning behind the significant adjustments implemented at the company throughout the last two years in an interview with Milling & Baking News. According to him, the company’s status as the top oilseed processor in the world provides a perfect foundation for growth and the development of supplementary industries.
The company was having difficulties when Mr. Heckman took over as CEO in January 2019. Three months prior, Mr. Heckman had joined the board of directors to assist with a thorough strategic review and assumed leadership of the company while the board conducted a search for a permanent CEO. He requested to be identified because he saw an immediate chance to improve the business and the dissatisfaction of the company’s international executives who were trying to advance the business.
“I said, ‘Look, I think we have a lot to do, I need to be acting,'” he recalled. “I need to be able to make decisions, and the team needs to know that I have authority. We have priorities.” that they won’t merely hold off till the following CEO arrives for a few months.
In those early days, Mr. Heckman said he was taken aback by what he learned about Bunge, a company he had long considered a rival as an agriculture executive and which he believed he knew and understood well as a board member.He said, “You know how it is in this industry.” “You are clients. You are rivals and suppliers. You engage in mutual transactions as well as M&A deals. However, you never trulycomprehend a firm until you get inside and get to know the employees, as these individuals are what make these companies tick. In my opinion, they are really different from other industries.
Soon after taking on the role of CEO, Mr. Heckman embarked on a global “listening tour,” which afforded him the chance to interact with and hear from the regional executives of the company.
“And that’s when I started getting really excited about this company’s unrealized potential and what we could achieve if we could just kind of get out of our own way,” he remarked. “At that point, they asked if I would accept the CEO position and resign my acting title, and I said, ‘Yes,'”
Mr. Heckman was not looking for work after retiring from a successful career at Conagra Foods, Inc. and subsequently Gavilon LLC. However, he was pulled to the ideals of the agribusiness sector and took on the role of leader of a 203-year-old company for a long time.
He remarked, “This is a company that is extremely important to the industry we work in.” This is a sector of the economy that has global significance. We’re not persuading anyone to buy our products, as I often repeat. Nobody is being sold anything they don’t need by us. It is fuel, food, and feed that is used by all people on a daily basis. Depending on how people are feeling about their situation in life and how much money they have in their pockets, they may utilize slightly more or less, but our sector is vital. This is a worthy endeavor. A hungry world is fed in part by us. There will undoubtedly be more individuals. We are aware that as circumstances change, they will continue to eat more and in various ways. And I came to a conclusion.
Modifications at Bunge Bunge’s asset base, managerial style, and operational structure have all undergone changes since Mr. Heckman took over as CEO in January 2019 in response to significant global changes in agricultural trade and production that the company was not designed to handle. Bunge tried to optimize its portfolio as part of the adjustments, concentrating on its core businesses:
Bunge and BP completed the transfer of their Brazilian sugar and bioenergy assets into a joint venture in December 2019.
Additionally, in December 2019, Seara Alimentos SA announced that it has come to an agreement to buy Bunge Ltd.’s mayonnaise and margarine assets located in Brazil.
Bunge said in January 2020 that its 13-year investment in Southwest Iowa Renewable Energy, LLC (SIRE) was coming to an end. SIRE bought back Bunge’s ownership.
The National Federation of Agricultural Cooperative Associations of Japan subsidiary Zen-Noh Gain Corp. announced in April 2020 that it will be purchasing 35 inside elevators from Bunge North America.
Farmers’ Rice Cooperative stated in November 2020 that an agreement had been reached to purchase Bunge’s rice mill located in Woodland, California.
Bunge Loders Croklaan consented the same month tosell Rotterdam, Netherlands-based refinery to Neste Corp. for cash of €258 million.
A key consideration in the company’s choice to keep certain firms was whether it believed there was a chance for future profits that would be adequate.
According to Mr. Heckman, “you don’t become a 200-year-old company without making some tough decisions along the way.” “Decisions that directly affect our valued colleagues are the most challenging ones. The key to successfully navigating through these internal changes has been being open and transparent with staff members about our strategy, the decision-making process, and how these decisions would ultimately strengthen our position as a business.
Just as significant as the divestitures were the actions taken to demolish a decentralized structure with regional autonomy, which the business had previously credited with contributing to Bunge’s entrepreneurial spirit and agility.
That had the benefit of speed in an earlier era, but Mr. Heckman stated that as the world grew more interconnected, it started to work against us. “In essence, we had several firms operating—one in each region, and one that we managed to the top. Our ability to unleash the potential of a single Bunge has been made possible by eliminating the regions and structuring the business around value chains. It’s our knowledge base, as well as our ability to act quickly and nimbly to meet client needs at bothends of the supply chain; the capacity to keep cutting costs and use our information to assist in resolving issues for our clients.
According to Mr. Heckman, changes in international trading patterns have increased the need to restructure the company structure.
“Take Brazil’s soybeans heading to our crushing facilities in China, for instance,” he stated. “Previously, it would have involved numerous internal transactions as well as multiple P&L (profit and loss) lines. The destination value chain now consists of a single transaction. The previous year is a prime illustration. The Brazilian real declines. The Brazilian farmer wanted to sell their crops, so we were able to purchase them to assist them maintain profitability while also selling them through our value chain by crushing them and selling the oil and meal to the Chinese market at that particular time.
“The regional lines were a construct that had worked extremely well in the past, but you have to look at the entire platform to understand how the global platform is operated, how we must benefit our consumers in the event of a disruption, and so on. At that point, a one-bundle method comes to mind.
According to Mr. Heckman, Bunge’s focus on customers at both ends of the supply chain is fundamental to the necessity of this strategy.
He stated, “That’s different than how a lot of industries think.” “The farmer is our client, and we must support their success. The final customer is at the other end, and we work with both B-to-B and B-to-C clients. So, how can we reduce the friction in our internal system to maximize efficiency along the value chain, satisfy customer needs, maximize efficiency along the entire value chain, and appropriately notify farmers?
The link between growers and grain firms needs to strengthen, Mr. Heckman said, despite the fact that farm storage of grain has increased dramatically over the past few years.
He remarked, “In some ways, they need our services more than ever.” “They are less compelled to make a marketing choice the more storage they have; the more flat pricing risk they must handle. They must now consider carefully before making that marketing choice. They now face greater logistical risk than ever before because to the increased amount of on-farm storage, as well as quality risk in holding that crop—risk that was formerly directly transferred to the commercials. This brings us to part of the marketing reward that comes with carrying and timing risk management. Risk and opportunity are two sides of the same coin, and it is our responsibility to assist them in managing both at the value chain’s beginning. Since it benefits everyone and is the only way we can feed a hungry world, we want all of our clients, at both ends of the value chain, to prosper and thrive.
According to Mr. Heckman, Bunge’s new organizational design will benefit the business in numerous ways. He claimed, for instance, that a novel method of allocating money will eventually produce substantial profits. The allocation process used to be controlled regionally, with funds allocated to each region to support its most promising projects and activities.
“We look at projects in a way that is not, say, doing the best project in South America or North America, we’re doing the best project at Bunge,” he added. “Today the capital comes to the center.” “We’ll all compete for the best project, whether it’s crushing soy or our soft seeds, serving renewable feed stock, or creating specialty fats and oils.”Financial attention discipline ranked highly on Mr. Heckman’spriorities in addition to Bunge’s daily risk management.
However, he added, “it was also the investments and the financial discipline around allocating capital to long-lived assets.” “We prioritized the portfolio, which resulted in the divestitures you observed. We resumed our position as the top producer of oilseeds in the world while concentrating on the industries that provide us with the most strength—fats and oils in particular.
Even if Bunge would not benefit from a decentralized business model right now, Mr. Heckman claimed it was essential to developing the company’s pool of highly qualified leaders. During the listening trip he led at the beginning of his CEO tenure, he learned about this depth.
“I traveled the globe, touring factories and offices alongside our staff members to learn about their biggest achievements and areas of frustration,” he remarked. “I came across this amazing team of genuinely enthusiastic workers. They had a great deal of passion for both Bunge and our clients. They were well acquainted with our clientele.
“Bunge has spent a great deal of time and money transporting people over the globe. Thus, we have this amazing team of skilled workers who were quite intensely focused on the areas in which they were employed. They had experience working in many parts of the globe. They had positions at several distinct companies. They frequently crossed the borders between helping the internal client who is driving the business and driving commercial and functional lines.There was a great deal of frustration, but they were also incredibly proud to be Bunge and passionate about winning.
Bunge relocated its corporate headquarters from White Plains, New York, to its current location in St. Louis in June 2020. According to the corporation, co-location offers employees additional options for professional advancement while also facilitating a deeper level of integration for corporate staff into the company’s daily activities.
Teams are already working together and communicating more, and possibilities for training and growth are being provided, according to Mr. Heckman. “These advantages will increase even more after we return to regular business following COVID.”The company’s commitment to strengthening Bunge’s oilseeds platform—a sector in which it leads—will underpin its growth initiatives.
“We want to be involved and a leader in that where industry consolidation makes sense,” Mr. Heckman stated. We’ll keep searching for chances for organic growth. We’ll keep unclogging our own system in order to better assist clients. We will also search for logical acquisitions.The acquisition of Loders Croklaan from IOI Corporation Berhad in 2018 serves as an example of the kinds of actions Bunge may contemplate. Long a prominent crusher and refiner of soybean and softseed oils, Bunge’s product line was expanded with the acquisition to include tropical oils like palm, coconut, and shea, providing Bunge with a “full slate of fats and oils,” according to Mr. Heckman.
According to Mr. Heckman, Bunge is well-positioned to benefit from the present surge in plant-based protein because to its crushing and refining platform. He was confident that plant proteins would see “multi-year growth” in the near future.
According to him, “many of those products rely on our specialty fats and oils to give them the mouthfeel, taste, and bite that people love when they eat these healthier plant-based products.”More specifically, instead of the company’s existing position as a “commodity supplier,” as Mr. Heckman described it, Bunge is searching for ways to supply the market for plant-based protein as a food ingredient. According to him, the company’s clients are searching for additional suppliers.
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He remarked, “They want to get us in.” You’ll hear more about our fantastic pipeline of initiatives in that area. We’ve made some minor project and investment announcements, but there will be more to come. We have the right to compete there and the right to succeed since there is a place that is firmly based on our global oilseeds platform. As I mentioned before, we’ll keep expanding the plant proteins because they work well with our unique fats and oils.
In August 2020, Bunge announced that it had invested $30 million in Merit Functional Foods, one of the first investments made in the industry. Merit is a Canadian business that has constructedA plant in Winnipeg, Manitoba that produces plant-based protein. At the facility, Merit intends to produce innovative canola and pea protein components.
According to Mr. Heckman, Merit’s goods include ingredients in anything from veggie burgers to protein shakes for fitness and health.Bunge, a manufacturer of lecithins in specialty fats and oils, stated that it had previously “had more of a commodity mindset.” The company is merging innovation capabilities with “go-to-market expertise” with Bunge Loders Croklaan. These niche markets offer opportunities for Bunge to enhance its offerings and better serve its clientele.
Maintaining and expanding a 200-year-old business necessitates long-term thinking, and according to Mr. Heckman, providing value to the customer in 2021 will entail understanding climate change and the potential role that methods like regenerative agriculture may play in alleviating the issue. Assisting farmers in implementing new agronomic techniques isa chance for businesses like Bunge to “play a huge role in that value chain,” according to Mr. Heckman.
Furnishing feedstock to the biofuels market is a natural complement to Bunge’s main business and a way to help combat climate change. Despite retreating from the ethanol market at the end of 2019 through the sale of its Southwest Iowa Renewable Energy, LLC investment, Bunge is still dedicated to supporting the biodiesel and renewable energy sectors, particularly their expansion in North America. According to Mr. Heckman, opinions toward biofuels are evolving.
“It’s what the consumers want,” he declared. “It is generating significant demand for vegetable oil, which is consistent with a multi-year trend.” The major oil firms in the US are investing in renewable diesel by converting their oil assets to process the fuel. This fuel can pass via their distribution networks and keep them using their assets.
“That presents an opportunity for us to assist in providing those feedstocks with a lower carbon index that consumers are requesting and that government regulations are supporting.”
The increasing demand for biofuels causes edible oil supplies to become more scarce, and price-conscious consumers may in certain cases demand reformulation. Bunge will be able to assist with its wide range of edible oils and fats.
“We can assist in resolving those issues because we are fundamental to all oils worldwide,” Mr. Heckman remarked. We are enthusiastic about the current economic trend and its implications. That will contribute to such renewable feed stocks having lower carbon index (CI) values.
According to Mr. Heckman, the future of biofuels is bright, even with some automakers pledging to convert their whole fleet to electric cars. Apart from the maritime and aviation industries, which are anticipated to maintain their dependence on high-intensity energy fuels, biofuels are anticipated to have a significant impact far into the 2030s and beyond, according to him.
He stated, “We can make a difference right now with bio-fuels. Hydrogen and other new technologies are under exploration, but people are trying to drive down their GHG (greenhouse gas) footprint right now and they are taking action.”Governments are passing laws and oil firms are investing heavily in order to achieve this goal in the near future.
Thus, he remarked, “this is a multi-year run.” “For an ag, it is quite exciting.”According to Mr. Heckman, the way biofuels are being described is different from the past. The benefits of biofuels were obscured in the complexities of the food vs. fuel arguments during the 1990s and 2000s.He observed, “It appears that governments, the oil and agricultural industries, and humanity are all aligned in their efforts to do what is right for the world, the climate, and humanity.” “Watching it develop will be fascinating; it feels different.”