Global retail companies ("supermarkets") have a growing influence on agricultural markets in developing countries and increasingly replace traditional marketing systems. By using primary data gathered from a domestic agricultural trader survey and from interviews of representatives of global retail chains and the farmers they work with, we contrast the functioning of both supply chains in the case of Madagascar. Traditional marketing is done by a myriad of small traders who offer little trade credit,use no forward ordering and do on the spot transactions driven by poor market institutions, high search costs and imperfect and asymmetric information. Larger traders rely more on relationships and social capital to partly overcome these problems. Giventheir desire for quality produce and their larger supply base needed, global retail chains put different systems in place. They procure their goods through micro-contracts, fixing the price in advance and supplying seeds, fertilizers and chemicals on credit. These contracts are further characterized by extensive farm assistance and supervision programs. In the case study and the business model presented here, there is no evidence that this would be a bad development for poor farmers.
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