Bunge Jumps in to Pakistan, India, China
Corn Products is the fourth-largest maker of high-fructose corn syrup in the U.S. and will give Bunge new customers in Pakistan, South Korea and Thailand, Credit Suisse analyst Robert Moskow said in a note on this deal. Corn sweeteners are used in soft drinks and processed foods instead of traditional cane or beet sugar because of their lower cost and higher concentration. A single 12-ounce can of soda has as much as 13 teaspoons of sugar in the form of high fructose corn syrup, according to San Francisco Chronicle. China, India and Pakistan have all seen double digit annual growth in consumption of soft drinks and processed foods for several years. Last year, PepsiCo growth in US and Europe was less than 3% but PepsiCo International sales were up 22%, an impressive increase fueled by double-digit growth in China, Russia, Pakistan and the Middle East.
According to the Wall Street Journal, corn and soybeans are the two biggest crops grown in North America and the two companies already are selling ingredients to many of the same players in the food and brewing industries. For Bunge, the combination will give it a bigger presence in several developing countries where a growing middle class is demanding more Western-style foods. Corn Products has extensive corn milling operations throughout South America. The company also operates in Mexico, Pakistan, South Korea and Thailand, among other places.
Corn Products was established in 1906 through a combination of U.S. corn-refining companies. The company processes corn in South America and has operations in Asia and Africa. In April, the company said first-quarter profit advanced 29 percent to $64.3 million, according to Bloomberg.
Processed foods and soft drink companies are often blamed in the United States for dramatic increases in obesity and diabetes, particularly among children. Some even accuse them of being merchants of death, not unlike the big tobacco companies. Many health experts argue that the issue is bigger than more calories. The theory goes like this: The body processes the fructose in high fructose corn syrup differently than it does old-fashioned cane or beet sugar, which in turn alters the way metabolic-regulating hormones function. It also forces the liver to kick more fat out into the bloodstream leading to heart disease.
While the presence and growth of Bunge, Pepsi and other food giants are likely to create more jobs in emerging economies such as India and Pakistan, the price for this opportunity is likely to be the danger of greater health problems associated with fats and corn sweeteners in processed foods and soft drinks.
Similar or even greater health threats are coming from the major expansion of tobacco giant Philip Morris in emerging economies. As the smoking rates in developed countries have slowly declined, they have risen dramatically in some developing counties, where PMI is a major player. These include Pakistan (up 42% since 2001), Ukraine (up 36%) and Argentina (up 18%), according to the Wall Street Journal. Philip Morris is currently building a major new plant in Pakistan.
Globalization offers many benefits, including access to good jobs and better living conditions in the emerging economies. However, globalization also brings with it all the ills that have been witnessed in the West, including environmental deterioration and life-style diseases such as diabetes, heart-disease, various forms of cancer etc. The challenge for Pakistan, and other countries like it, is to learn from the mistakes of the West. Instead of just repeating such mistakes, Pakistan, India and China must find ways to extract the benefits while minimizing the cost of modernization.