This study shows the impact of a set of market systems development interventions by the Alliances Caucasus Programme (ALCP) on informality and working conditions in Georgia’s dairy sector. To reduce poverty for small scale livestock producers who made up over ninety per cent of milk producers, the programme designed interventions that ensured their continued inclusion at scale in the value chain. The growing need to satisfy food safety and hygiene requirements in the dairy sector and from 2015 to implement the Hazard Analysis and Critical Control Points (HACCP) standards as a prerequisite to accessing formal markets provided an incentive for the formalization of emerging, informal dairy enterprises dependent on milk supply from small scale farmers; thus triggering a transformation across the dairy value chain. Building on these incentives, the ALCP provided facilitation, which comprised of co-investment, consultancy services, training and mentoring to dairy enterprises, and equipped them to guide farmers towards providing milk that complies with standards whilst also working on supporting functions and rules and regulations constraining the sector such as veterinary inputs and animal disease control. In doing so, the income and productivity of farmers and dairy enterprises increased and the working conditions in dairy enterprises improved. The study shows how formalization can be a means to reduce poverty, safeguard and expand sources of income and achieve systemic change in a market system.