We have analyzed the marketing behavior of sweet pepper
farmers in Thailand in the light of ongoing market differentiation.
In particular, we examined the role and details of contractual
arrangements to better understand farmers’ market channel
choices. Sweet pepper was introduced in Thailand some 10 years
ago, mainly meant for exports and upscale domestic supermarkets.
Initially, specialized companies were the only available marketing
channel, purchasing sweet pepper from farmers via contractual
arrangements. More recently, the Royal Project, which also caters
for modern retail outlets, and traditional village traders entered
the market. Whereas the Royal Project also mostly works with contracts,
many village traders purchase sweet pepper from farmers
without a contractual arrangement. Over time, village traders became
the most important marketing channel for sweet pepper;
many farmers who had previously sold to companies switched to
supplying village traders.
Our descriptive comparison of marketing channels and contract
features confirms that significant differences exist, which influence
farmers’ choices. While output prices matter, farmers also value
other aspects such as access to inputs, credit, and information, as
well as independence and flexibility. Contract marketing channels
are associated with higher net incomes. Strikingly, however, gross