FOOD, FUEL & WORLD MARKETS

WORLD WIDE ISSUES

&

PROBLEM STATEMENT

“Given the volatility of the global petroleum

market and increased awareness to

environmentally friendly options, how does

bunge position its operations to remain

competitive?”

CURRENT STRATEGY

Global Agribusiness

Bunge’s strategy rests on its newly founded Bunge Global Agribusiness divisions whose focus is on vertically integrated operations improving value by linking different regional and international markets together.

CORE COMPETENCIES

• A decentralized network of distinct regional offices

• A vertically integrated value chain, allowing for economies of

scale.

• Most recognized fertilizer brand on the market with a 26%

market share.

INTERNAL ANALYSIS

STRENGTHS WEAKNESSES

• Experience within the industry

• Strong risk mgmt• Economies of scale

& scope• Localization

adaptation

• No Global Brand Image,

• Only entralized in Brazil

• Too much capital in inventory during transport

• Shareholders have a LT mandate

RESSOURCESPRODUCT LIFE CYCLE

GROWTH SHARE MATRIX (BCG)

VALUE CHAIN

INBOUND LOGISTICS

Farmers Use Fertilizer To Grow Crops

OPERATIONS Sell Crops To ElevatorsDISTRIBUTI

ON Loaded & ExportedOUTBOUND LOGISTICS Oil Is Extracted

SALES Buy Bottled Oils

SERVICESeeds Can Be Converted Into Biofuels

SUPPORTFinancial Report, IT, Fiscal Department

EXTERNAL ANALYSIS

• World population growth of 1.35% per year

• World per capita income growth of 1.4% per year

• Increasing demand for soybean meal due to higher income population

EXTERNAL ANALYSIS

• Cheap and big quantity of corn tortillas in Mexico

• Soybeans popular in China• Demand for soybean and

vegetable oil has risen at 5% per year, especially in Asia.

EXTERNAL ANALYSIS

• Concerns for the extent and durability of government subsidies

• Lower import duties on edible oils in India

• Restriction policies in China• Pro-alcohol policy contribution to

Brazil

EXTERNAL ANALYSIS

• Volatility and uncertainty of crop prices

• Petroleum fuel’s volatility• Large investments increasing in

energy markets• Indonesia and Malaysia produce

80% of world’s palm oil and has the lowest production costs

EXTERNAL ANALYSIS

EXTERNAL ANALYSIS

• Reduced production yields of sugarcane plantation due to poor weather in Brazil

• Climate, soil conditions, and farming practices affect productivity and feedstock costs

• Greenhouse-gas savings in sugarcane-based ethanol

• Experimental stage of second biofuels such as cellulosic ethanol

EXTERNAL ANALYSIS

• Bunge’s major regions for corn exports are in North and South America and some in Europe

• Their net sales to external customers are ranked highest in Europe and US

• Middle East conflicts affect the global oil supply

• EU-wide mandate of 5.75% biofuels inclusion

EXTERNAL ANALYSIS

PORTER’S FIVE FORCES MODEL

POWER OF BUYERS

POWER OF SUPPLIERS

SUBSTITUTESTHREAT OF

NEW ENTRANTS

RIVALRY

LOW

LOW/MODERATE

MODERATE

HIGH

MODERATE

EXTERNAL ANALYSIS

UNIQUENESSCOST

BR

OA

D

TAR

GET

MA

RK

ET

NA

RR

OW

TA

RG

ET

MA

RK

ET

FINANCIALS

In Millions Agribusiness Fertilizer Food Products2006 2005 2004 2006 2005 2004 2006 2005 2004

Net Sales 19,106 17,459 17,977 2,602 2,674 2,581 4,566 4,244 4,676

Operating Profits 86 275 358 202 81 372 155 100 120

Operating Margin 0.45% 1.58% 2% 7.76% 3.03% 14.41% 3.39% 2.36% 2.57%

% of Total Net Sales 72.72% 71.62% 71.24% 9.90% 10.97% 10.23% 17.38% 17.41% 18.53%

% of Total Operating Profits 19.41% 60.31% 42.12% 45.60% 17.76% 43.76% 34.99% 21.93% 14.12%

Total Assets 8,339 5,867 5510 2,979 2,774 2,428 2,022 2,070 2,020

Assets Turnovers 2.29 2.98 3.26 0.87 0.96 1.06 2.26 2.05 2.31

Return on Assets 1.03% 4.69% 6.50% 6.78% 2.92% 15.32% 7.67% 4.83% 5.94%

Capital Expenditure 285 267 211 106 135 158 112 120 68

Capital expenditure to sales ratio 1.49 1.53 1.17 4.07 5.05 6.12 2.45 2.83 1.45

ALTERNATIVE: OUTSOURCING

SCOPE OUTSOURCE USING GLOBAL FREIGHT SERVICE

PROS CONS• INCREASE IN PROFIT

MARGINS• REDUCE RISK• CUSTOMER LOYALTY• INCREASING

POPULATION• MORE CENTRALIZED

STRATEGY

• HIGH BARGAINING POWER OF SUPPLIERS

• NOT VERTICALLY INTEGRATED

• NOT DECENTRALIZED (CORE COMPETENCY)

• ELIMINATE OPPORTUNITY FOR BIODIESEL

ALTERNATIVE: OUTSOURCING

COST/BENEFIT ANALYSIS

• Outsourcing will mean an increase in Freight supply agreements

• Outsource storage facilities, transportation equipment and office facilities

• Economies of scale on the increase of business resulting in additional Supply agreements of $150Million per year. (35% of current Supply agreements)

• Initial cash inflow from the sale of transportation division ($614Million).

ALTERNATIVE: BIOFUEL

SCOPE

PROS CONS

ACQUIRE ENERGY FOCUSED SMALL TO MEDIUM FIRMS IN USA & BRAZIL

• LOW PRODUCTION COSTS IN BRAZIL

• TAX CREDITS FOR PRODUCING IN USA

• ENVIRONMENTALLY FRIENDLY INDUSTRY GROWTH

• HIGH DEMAND

• LACK EXPERIENCE• INCREASING

COMPETITION• EXPENSIVE AND RISKY• NEGATIVE IMPACT ON

BUNGE BRAND

ALTERNATIVE: BIOFUEL

COST/BENEFIT ANALYSIS

BENEFIT FROM INCREASING DEMANDS OF BIOFUEL : • EU 4 BILLION GALLONS OF BIOFUEL BY

2010• USA 35 BILLION GALLONS BY 2017• INVESTMENT IN ETHANOL PLANT AND

PRODUCTION COSTS = 234.29 MILLION TO PRODUCE 43.4 MILLION GALLON OF ETHANOL IN BRAZIL (PER YEAR/PLANT)

ALTERNATIVE: GO ASIA

SCOPE

PROS CONS

COOPERATIVE ALLIANCE WITH LOCALS

• CAPTURE INCREASING DEMAND IN FOOD PRODUCTS (I.E. INDIA)

• FIRST MOVERS ADVANTAGE• HIGHER ECONOMIES OF

SCALE• POTENTIAL INCREASE IN

MARKET SHARE• LOWER PRODUCTION

COSTS

• EXPENSIVE• EXISTING COMPETITORS• GOVERNMENT

REGULATIONS (I.E. CHINA)

• LACKING INFRASTRUCTURE

ALTERNATIVE: GO ASIA

COST/BENEFIT ANALYSIS

BUNGE WILL HAVE TO GO DOWN ITS VALUE CHAIN BUYING LANDS AND PLANTING THESE LANDS BY GOING INTO ASIA, BUNGE WILL BE ABLE TO CUTTING FREIGHT COSTS IN HALF IN COMPARISON TO BRAZIL BUT WITH LOW COSTS OF PRODUCTIONS JUST LIKE BRAZIL.

RECOMMENDATION

ALTERNATIVE 1

ALTERNATIVE2

IMPLEMENTATIONIMPLEMENTATION

SHORT-TERM2~3 YEARS

MEDIUM-TERM5~6 YEARS

LONG-TERM8~10+ YEARS

• ACQUIRING ENERGY COMPANIES• RESTRUCTURING THE ACQUISITIONS• AQUIRING LOANS• OPEN NEW FACILITIES AND PLANTS IN USA

IMPLEMENTATIONIMPLEMENTATION

SHORT-TERM2~3 YEARS

IMPLEMENTATIONIMPLEMENTATION

MEDIUM-TERM5~6 YEARS

• IMPLEMENT BIOFUEL AT GAS STATIONS• ANALYZE NET POSITIVE CASH FLOWS

• OPEN UP NEW FACILITIES• INCREASE BRAND RECOGNITION• EUROPEAN EXPANSION

IMPLEMENTATIONIMPLEMENTATION

LONG-TERM8~10+ YEARS

• PROMOTE GREEN ENERGY/MOVEMENT• SPONSORSHIP• DOMINANCE IN THE US

CONCLUSION

OUTCOMES

RECOMMENDED SOLUTION

ALTERNATIVES

PROBLEM

THANK YOU.DO YOU HAVE ANY QUESTIONS?