Sweet pepper was introduced in Thailand in 1999 by a Dutch
company. Because of climatic conditions, the northern upland
areas were the primary target regions, especially those near the
city of Chiang Mai, where infrastructure and market access conditions
were relatively favorable. In particular, the company chose
the Mae Sa watershed, where farmers were contracted to produce
red and green sweet pepper in greenhouses, using hydroponics
systems that make cultivation independent from soil quality conditions (Schipmann and Qaim, 2010). Sweet pepper cultivation
is labor and input intensive and associated with high capital
investments, since sophisticated greenhouses are required. Since
farms in the watershed are predominantly small-scale, with an
average farm size of 1.6 acres, the company initially provided credit,
private extension, and certain inputs to contracted farmers.
In 2007, three different marketing channels existed for farmers.
The first consists of private agribusiness firms that deal with sweet
pepper for export and for domestic supermarkets. Beyond the
Dutch company, which had started the business in 1999, two additional
firms have entered the market more recently. All three companies
purchase sweet pepper from local farmers. The second
marketing channel is the so-called Royal Project, which started to
deal with sweet pepper in 2002. The Royal Project is a subsidized
initiative by the King of Thailand to support disadvantaged farmers
in the upland areas and offer alternatives to opium production,
which was widespread in the 1970s and 1980s. The Project sells
vegetables and other agricultural products in upscale retail outlets
under its own brand name, which Thai consumers recognize as
being of very high quality. However, only hill tribe farmers, who
make up a relatively small part of the population in the Mae Sa watershed,
officially have access to the Royal Project marketing channel.
We consider these first two marketing options as modern
retail channels. In contrast, the third channel involves traditional
village traders, who also entered the sweet pepper market more recently. They mostly supply traditional wholesale and retail markets
in Chiang Mai and Bangkok