Bunge’s Quest for Sugar High Isn’t So Sweet
Bunge Ltd., an agribusiness and food company that spent $1.3 billion to expand its sugar business in Brazil is still waiting for the expansion to occur when they unknowingly took a risk by operating as a producer. The company has bought grain and other crops from farmers but hasn’t produced sugar cane on their own by operating their own firms. Without this knowledge, their biggest challenge was the inability to grow sugar cane to supply its plants because of the weather in the past few years. Bunge now controls thousands of acres of sugar cane plantations as they claim that the weather has been more favorable this year compared to a drought that struck them in 2010. With other competition in Brazil, the company also faces a decrease in sugar sales. To resolve their issue, they invested fifteen million dollars to create new irrigation systems that would boost yields and improve their farming techniques to produce more sugar cane for its mills. They are also trying to pursue new revenue streams that will produce sweeteners and ethanol fuel. It is risky for a company to enter a field that is unknown to them, where Bunge entered sugar farming and suffered a large fourth-quarter loss. A company should do research about the market that they are about to enter and decide whether it will be profitable for them in the long run.
Written by: Samantha Chin
Source: The Wall Street Journal
Berry, I. (2013, March 16). Bunge’s Quest for Sugar High Isn’t So Sweet. Retrieved March 17, 2013, from The Wall Street Journal: http://online.wsj.com/article/SB10001424127887324392804578360210796376062.html?mod=WSJ_business_whatsNews