ISSN xxxx-xxxx (print) © Firenze University Press
ISSN 2280-6172 (online) www.fupress.com/bae
Bio-based and Applied Economics 1(1): 29-45, 2012
The Experience Economy as the Future for European
Agriculture and Food?
Johan Swinnen, KriStine Van hercK* and thiJS Vandemoortele
LICOS Centre for Institutions and Economic Performance University of Leuven (KU Leuven), Leuven, Belgium
Centre for European Policy Studies (CEPS), Brussels, Belgium
Abstract. As recently as a century ago, one out of two people in Europe was employed
in the agricultural sector. Today agriculture represents only a small fraction of total
employment in most EU member states. What makes this decline in agricultural
employment even more striking is that this evolution has occurred despite substantial
EU subsidies to support farmers’ income. Given the apparent ineffectiveness of govern-
ment support in keeping agricultural employment steady, it is worth considering which
farming activities are likely to be successful in the economy of the 21st century. We
argue in this paper that a potential growth path for European agriculture is the «expe-
rience economy» in which consumers are willing to pay premium prices for products
and services that provide additional intangible ‘experiences’. We discuss the growth
potential of the «experience economy» in the agricultural sector and conclude that it is
worthwhile to consider the experience economy as a pathway for future farm growth.
Keywords. Agriculture, experience economy
JEL-codes. Q10, Q13, Q18, R11
1. Introduction
Raising the question whether Europe will be without farmers may sound ridiculous at
a time when the European Union (EU) has almost 12 million ‘farmers’ and when the issue
of being able to feed the world population is at the top of the international policy agenda.
However, as we will argue in this paper, the question is not only relevant, it also has major
implications for the current debate on the future of the EU’s Common Agricultural Policy
(CAP) and even for the more broader debate on the EU 2020 Strategy.
Just a century ago, four out of five households in the world were engaged in the agri-
cultural sector. Today, agriculture represents only a marginal share of total employment in
the developed world. In his fascinating treatise A World Without Agriculture Peter Timmer
(2009) discusses the world economy’s structural transformation and how it is propelling the
global economy – and especially the rich countries – toward «a world without agriculture».
A similar process is taking place in Europe. Statistics on agricultural employment and
gross value added (GVA) indicate that the agricultural sector is (slowly) ‘disappearing’. In
* Corresponding author: Kristine.VanHerck@econ.kuleuven.be.
30 J. Swinnen, K. Van Herck and T. Vandemoortele
the EU 27 the share of the agricultural sector in total GVA and employment has decreased
to respectively 1,7% and 5,4% in 2010. In many European countries, these numbers are
even lower. Spain is a good illustration. As recently as the 1960s, 50% of the population
was employed in the agricultural sector. The decline has been dramatic: currently only
4.6% of the population is working in agriculture (Figure 1).
What makes this spectacular decline in agricultural employment even more striking
is that this evolution has occurred despite large subsidies under the CAP. In the period
2005-2010, the EU spent roughly €50 billion per year on supporting farmers – and includ-
ing support through market regulations, up to €77 billion in 2010 (OECD, 2011). It is evi-
dent that government support is ineffective in sustaining farmers’ income at levels suffi-
cient to keep agricultural employment steady. In fact, evidence suggests that, paradoxical-
ly, farm subsidies may increase the outflow of farmers instead of reducing it; see Swinnen
and Van Herck (2010) for a review1.
1 Evidence from the OECD countries and inside the EU suggests that the outflow of labor from agriculture has
been strongest in those countries and sectors that received most government support for the agricultural sector.
In fact, over the past two decades there is actually a negative correlation between the change in agricultural sup-
port and the change in agricultural employment in the OECD countries – which is inconsistent with the notion
that agricultural support has a significant positive impact on agricultural employment in the long run. There are
several (potential) reasons for this: Goetz and Debertin (1996; 2001) find that farm payments accelerate capital-
labor substitution and stimulate the takeover of farmers seeking to exit. Petrick and Zier (2010) find that large
farms benefited more from farm payments, at the cost of smaller farms. Berlinschi et al. (2012) argue that sub-
sidies allow further skill improvements of farmers’ offspring which enables them to earn higher returns in (and
switch to) other economic sectors.
Figure 1. Share of agricultural employment in total employment (%; 1960-2010)
0
5
10
15
20
25
30
35
40
45
50
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
Sh
ar
e
of
a
gr
ic
ul
tu
ra
l
e
m
pl
oy
m
en
t
(
%
)
Spain
France
Italy
Netherlands
United
Kingdom
Source: ILO (2010), Eurostat (2010)
31The Experience Economy as the Future for European Agriculture and Food?
The nature of farming is also changing. Farmers are increasingly turning into business
managers and policy debates are emphasizing farmers’ role as managers of the landscape
and the environment (Lans et al., 2004; RISE, 2009).
These changes have important policy implications in responding to the demands of
modern society. Most of the debate on CAP reform has centered around the question
how much of the budget should be allocated to agricultural policy in the EU after 2013,
and how this budget should be spent, i.e. whether the current system of «single farm pay-
ments» with cross-compliance requirements is to be continued, changed, or abolished.
In this paper we take a different perspective. We focus on the question which farming
activities are likely to be successful in the economy of the 21st century – with or without
government support. In other words: will Europe be without farmers or not? And if not,
how will these European ‘farmers’ look like in the 21st century? In this perspective, we
focus on one major element of change that appears to have major implications for future
economic success – and thus also for the success of farming in the 21st century: the shift
from a service economy to an «experience economy».
Our approach is different from Van der Ploeg et al. (2000) and others who analyze the
role of rural development and multifunctionality in the European agricultural sector. Our
analysis focuses on changes in (private) consumer demand as a main driver behind these
changes, namely the rapid increase in the demand for experience – related products and
services2.
2. The next revolution: towards an «experience economy»?
2.1 What is the «experience economy»?
Our society has evolved from an agrarian economy – which dominated the world for
thousands of years – to an industrial economy in the 19th and early 20th century, and to
a service economy in the late 20th century. Since the end of the 20th century, our society
has started to move in a new direction: the «experience economy». Consumers in affluent
societies have begun to take the quality offered by the service economy for granted and are
expecting something extra – «experiences» – from the goods and services they purchase.
This evolution is described by Pine and Gilmore (1999) and Jensen (1999), who
show that the share of consumers’ income spent on commodities and goods is declin-
ing, while the share of income spent on leisure activities and entertainment is increas-
ing. The authors argue that the «experience economy» is taking over and will become the
main value-generating element for firms in the 21st century. Pine and Gilmore (1999) call
the key attribute in this evolution «experiences», which they describe as «memorable, but
intangible offerings which allow the consumer to enjoy events or the consumption of a
good in a personal way». Jensen (1999) defines it as «stories», which are «symbolic value
statements that reinforce the consumer’s identity and communicate his beliefs and goals».
Common to both approaches is that each underlines the importance of adding authentic-
ity, feelings and emotions to products and services in order to satisfy the demands of the
2 In addition, we discuss the shift from a service to an experience economy from an economy-wide perspective,
whereas Van der Ploeg et al. (2000) focus exclusively on the agricultural sector.
32 J. Swinnen, K. Van Herck and T. Vandemoortele
post-materialistic consumer who is today – and will be even more so in the future – not
just searching for high-quality services and products, but also for a story to which they
can emotionally relate.
An illustration is the rapid increase in popularity of pop and rock concerts and many
sports events. For example, the number of visitors to one of Europe’s most famous rock con-
certs, «Rock Werchter» in Belgium, increased from 5,000 visitors in 1978 to 320,000 visitors
in 2010. This is no exception: all over the world hundreds of thousands tickets for concerts
by famous singers, bands and performers sell out in minutes on the internet. At first sight
this is remarkable: with improved technology and declining costs of purchasing music, the
quality of music is better and the price lower when listening at home. The same holds for
sports events: the view is typically much better on TV. However, concerts and sports events
are able to offer an experience that listening or watching at home cannot provide: a great
atmosphere and a sense of belonging and togetherness – short: «the experience».
In order to more precisely relate the concept of «experiences» to consumer theory in
economics, we draw on the work of Tirole (1988) and Ronnen (1991) on modeling quality
and Andreoni (1989) and Besley and Ghatak (2007) on modeling a «warm glow» compo-
nent in consumers’ preferences3.
We define products and services as consisting of three components, each adding value
to the product or service. The first component is the physical good or service. The second
component comprises the good’s or service’s quality characteristics. «Experiences» are the
third component. If present, this third component adds value to the commodity or ser-
vice for consumers who care about these experiences, and thus increases these consum-
ers’ willingness to pay for the product or service. «Experiences» – in contrast to «quality»
– have an intangible impact on consumers. All else equal, there is no tangible difference
between consuming a fair-trade product or a traditional product at the consumer’s level,
but a consumer may draw a «warm glow» from this experience feature by believing that
his consumption ensures a fair share for poor farmers in developing countries4. In short,
consumers value «experience products» for the attached story (Jensen, 1999).
Formally, define consumer i’s indirect utility from consuming product (or service) j as
Vi (pj, bj, qj, ej),
where pj is the price of product j, bj is the value of the physical good or service which also
encompasses the quantity consumed, qj is the product’s quality, and ej is the “experience”
embodied by the product. This indirect utility function can be further specified in diffe-
3 The «warm glow» effect was originally coined by Andreoni (1989), who argued that the internal motives for
charitable giving are more important than many people had acknowledged. In the warm-glow view of philan-
thropy, people are not giving money to save the whales; they are giving money to feel the glow that comes with
being the person who helps to save the whales.
4 Note that our definition of «experiences» is therefore different from the concept of «experience characteristics»
as defined by the economic literature on information asymmetries and externalities. This literature distinguish-
es between «search», «experience», and «credence» characteristics of products (Nelson, 1970; Darby and Karni,
1973). Search attributes are those that consumers can ascertain in the search process prior to purchase, while
experience characteristics can only be discovered after purchasing and using the product, and credence qualities
cannot be evaluated in normal use. These three meta-characteristics may apply to tangible or intangible charac-
teristics, and are therefore not useful in distinguishing between quality and experience components.
33The Experience Economy as the Future for European Agriculture and Food?
rent ways. For example, a quasi-linear, unit-demand specification could have the following
form (see Swinnen et al. (2012) for a formal derivation)5:
Vi (pj, bj, qj, ej) = bj + ϕiqj - pj + γif(ej).
As before, bj is the value of the physical good or service and is identical among con-
sumers. Here it is independent from quantity consumed as we specify a unit-demand
function. ϕi is a consumer-specific parameter, with distribution G(ϕi), which measures
consumer i’s quality preferences – a higher ϕi refers to a higher preference for the prod-
uct’s quality qj. ϕiqj is the central component of the indirect utility function specifications
used in the vertical differentiation literature (Tirole, 1988). The fourth component, γif(ej),
represents consumers’ valuation of the “experiences” embedded in product j, where f(ej) is
the (concave) valuation function of these experiences. Consumers who value these experi-
ences more have a higher γi.
To illustrate the components, consider apples: qj represents the taste of the apple and/
or the absence of harmful pesticide residues, and f(ej) could represent the consumer’s
appreciation of buying the apple at the local farmers’ market, or of knowing that the apple
has been produced in an environmentally friendly way, etc. For a different example, con-
sider a Harley Davidson motorbike: qj is quality (speed, etc.) and safety of the vehicle, and
f(ej) the feeling that comes with driving a Harley Davidson or belonging to the commu-
nity of Harley Davidson motorcyclists.
From these examples, it is clear that consumers have different reasons to value diffe-
rent “experiences”. For example, in the case of “environmental friendliness”, the experience
is valuable to consumers because it represents the private provision of a public good6. In
the case of the Harley Davidson example, the valuation of the experience – “belonging to
a community” – may be driven by the interdependence of consumers’ utility functions, i.e.
so-called “Veblen-effects” or “conspicuous consumption” (for more information, see e.g.
Bagwell and Bernheim, 1996 and references therein).
However, despite this clear theoretical distinction, the distinction between experienc-
es and quality characteristics may be less clear in practice and at least some characteris-
tics may have both quality and experience components. For example, “organic” may refer
to healthier products (a quality feature) and/or cultivation under more environmentally
friendly conditions (an experience feature).
2.2 Markets of experience
Jensen (1999) identifies six markets in the experience economy: (1) the market for
adventures, where people pay to participate in adventures (e.g. hot-air balloon travels,
exotic trips, festivals where people dress up as soldiers or medieval knights, …); (2) the
market for togetherness, friendship and love, which comprises of movies, novels and art-
5 Although standard in the literature, this specification only serves as an illustration here, and, as any functional
specification, has its limitations.
6 Remark however that this does not imply that increasing demand for public goods is necessarily reflected by an
increasing demand for private goods that (claim to) supply these public goods.
34 J. Swinnen, K. Van Herck and T. Vandemoortele
work, but also theme parks, concerts, sport games, etc. – and to some extent also restau-
rants and bars where people go for food and drinks (services), but also for conviviality;
(3) the market for caring, which targets people who have a need to receive or provide care,
to show compassion and to help others or nature. Consumers also experience a good feel-
ing or “warm glow” by engaging in charity; (4) the market for self-definition, where prod-
ucts and services become means of self-definition. Individuals tell a story about them-
selves by the way they dress, the places they visit, and the events they attend. For example,
purchasing a Harley Davidson is not only buying a motorbike but also the identity that
goes along with it; (5) the market for peace of mind and tradition, which targets consum-
ers searching for peace of mind and tradition. One example of this interest in tradition is
“rural romanticism”, which potentially explains the growing interest in organic food prod-
ucts and farmers’ markets; and (6) the market for convictions, where people pay for prod-
ucts that are consistent with their ethical beliefs. Those consumers value the concept “ani-
mal welfare” and support environmental organizations such as Greenpeace.
2.3 Importance of the “experience economy”
Experiences are of course nothing new and have, for example, always been at the
heart of the entertainment industry, from sports events to movies and pop concerts.
However, it appears that demand – and with it economic performance – has grown sub-
stantially. Companies have started to add and “wrap” experiences around their traditional
products and services to make these more attractive, allowing better differentiation from
their competitors and higher prices.7
Coffee is a good example to illustrate how adding experiences to a basic product may
provide firm-specific growth opportunities. Pine and Gilmore (1999) analyze the rev-
enue distribution of a cup of coffee through the supply chain in the late 1990s (Figure 2).
Companies that traded the basic commodity, the coffee bean, got a price of $1 per pound,
which translated into one or two cents per cup of coffee. When manufacturing companies
ground, packaged and sold the same beans in a grocery store, the price increased from 5
up to 25 cents per cup, depending on the type of beans. When the coffee was served in a
local coffee shop, the price per cup varied between 50 cents and $1, but when it was sold
in a Starbucks Coffee shop – which explicitly advertises “experience” as one of its assets
– the price would range between $2 to more than $5 per cup. Hence, providing an addi-
tional and distinct experience to a cup of coffee allows the Starbucks Coffee Company to
charge the consumer a substantially higher price for the same product. Yet, despite this
disproportional rent distribution, the success of Starbucks and similar companies has only
increased. While Starbucks initially grew in the US – a country not known for its high-
quality coffee in the 1990s – the growth of Starbucks shops outside the US has been the
most remarkable aspect of its expansion, at least from an experience perspective. The suc-
cess of Starbucks outside the US was illustrated by its recent opening of a shop in Ant-
7 The computer repair firm “Geek Squad” is an example of a company that “wraps” an experience around an
existing service. The “Geek Squad” employees are all dressed as special agents: they wear white shirts and black
ties and have badges in order to identify themselves as “Geek Squad” agents. By adding this “show” to their ser-
vice, they provide such a distinctive computer repair service that satisfied clients buy t-shirts and pins with the
company’s logo.
35The Experience Economy as the Future for European Agriculture and Food?
werp (Belgium). Despite the fact that it is easy to get a decent cup of coffee for a fraction
of the Starbucks price at other nearby places in the city, people queued for hours when the
Starbucks Coffee Company opened the doors of its first shop in Antwerp.
Figure 2. Price of coffee offerings
0 $
1 $
2 $
3 $
4 $
5 $
6 $
Commodity Good Service Experience
Source: Pine and Gilmore (1999)
Figure 3. Annual growth in employment and nominal gross domestic product (GDP) per economic
offering (%, 1959-1996)*
-0.7%
0.5%
2.3%
2.7%
5.3%5.6%
6.4%
7.9%
8.5%
8.9%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Commodities Goods All Offerings Services Experiences
C
om
po
un
d
A
nn
ua
l G
ro
w
th
R
at
e
in
E
m
pl
oy
m
en
t a
nd
N
om
in
al
G
D
P
(%
)
Employment Nominal GDP
* The authors base their estimates for employment and nominal GDP growth of the category «Experi-
ences» on admissions to recreational events (movies, concerts, sports, etc.).
Source: Pine and Gilmore (1999)
36 J. Swinnen, K. Van Herck and T. Vandemoortele
Since the experience economy is a broad concept, it can be measured in various ways.
Pine and Gilmore (1999) estimate that the experience economy –measured by admissions
to recreational events such as movies, concerts and sports games – was the fastest growing
sector with an annual growth of 8.9% in nominal GDP and 5.3% in employment (Figure
3). In contrast, commodity output in the US grew annually only at 5.6% and employment
even shrank from the 1960s through the 1990s. Manufacturing output grew at an annual
rate of 6.4% and also employment grew slightly (0.5%). The services sector’s output and
employment grew respectively by 8.5% and 2.7% per year.
3. Agriculture and the experience economy
To analyze its relevance and potential for the European agricultural sector, we look at
several different, yet admittedly imperfect indicators. Indicators of the experience econo-
my are imperfect because there is no agreement on its definition and because the indica-
tors may capture both quality characteristics and experiences. For example, some people
buy ‘organic’ for health-related reasons (a quality characteristic), while others buy ‘organ-
ic’ for its lower environmental impact (an experience characteristic). However, without
detailed studies on consumer behavior – which are currently not available – it is not pos-
sible to determine which share of consumers buy a product for its quality or its experience
characteristics. Nevertheless, these indicators may be useful.
As an introductory indicator, we first compare the agricultural sector as a whole with
two other sectors that are more closely associated with the experience economy, name-
ly the recreational, cultural and sports (RCS) sector, and the hotel and restaurant sector.
In 1995, the agricultural sector represented 2.7% of GVA and 5.0% of total employment
– approximately the same as the hotel and restaurant sector but considerably more than
the RCS sector. However, by 2010 agricultural employment dropped to only 3.3% of total
employment (a 34% decrease). In the same period, the employment share of the hotel and
restaurant sector grew to 5.1% (a 19% increase) and the employment share of the RCS
sector even more, from 1.8% in 1995 to 2.3% in 2010 (a 28% increase). Moreover, agri-
culture fell below the RCS sector. GVA generated by RCS activities had an average annu-
al increase of more than 5%, while GVA generated by the agricultural sector remained
approximately the same over the past decade. The GVA of the RCS sector overtook agri-
culture’s GVA in 2004, and the gap has been widening ever since (Figure 4).
However, as mentioned, this indicator is imperfect. One reason is that the experience
economy has grown inside the agricultural and food system as well.
3.1 Experience standards in the agricultural and food industry
Compared to fifteen years ago, all agricultural and food products are subject to a range
of new product and process standards. Many of these are safety and minimum quality
standards, but increasingly they also relate to experience concepts such as animal welfare
and the environment. Until 20 years ago, issues such as ecology, global warming, animal
welfare and genetic engineering were relatively unimportant in the marketing of products
and services, but because consumer concerns about these issues have been on the rise, new
«experience standards» have been imposed and increasingly affected agricultural production.
37The Experience Economy as the Future for European Agriculture and Food?
The private sector appears to have taken the lead in introducing experience standards.
Most retailers impose private standards on their suppliers, and these private standards are
frequently more stringent than their public counterparts. This holds particularly for expe-
rience standards. These private experience standards are closely related to, and in most
cases part of a company’s ‘Corporate Social Responsibility’ (CSR) strategy8.
One specific example of an experience standard which has been rapidly adopted by the
private sector is free-range eggs. Despite the frequently demonstrated absence of quality
differences between eggs from free-range and battery hens (Van Den Brand et al., 2004),
consumers are willing to pay more for free range eggs. In Belgium for example, the market
share of free range eggs – with a price premium of 20 to 40 percent – was as high as 90%
in 2011 (VLAM, 2011). Also in this particular example, private retailers have taken the
lead in adopting private standards to address consumers’ animal welfare concerns. While
eggs from battery cages are officially prohibited only from 2012 onwards, several retailers
8 CSR is defined by the European Commission as «a process, whereby companies integrate social, environmental,
ethical and human rights concerns into their business operations and core strategy in close collaboration with
their stakeholders». Although this process is not new, it was characterized by stellar growth in the past decade and
is currently ranked as the number one priority of managers in the global retail and consumer goods sector (The
Consumer Good Forum, 2011). There is an extensive literature dealing with various aspects of CSR, from the eco-
nomic justification of CSR to its implications on firm performance (Hartmann, 2011). One specific strand of this
literature relates to our concept of «experience» and analyzes firms’ incentives to compete for «ethical» consumers
(e.g. Bagnoli and Watts, 2003; Besley and Gathak, 2007), in which ethical consumers derive utility from buying
products from firms that adhere to certain ‘experience’ standards such as fair trade or animal welfare standards.
Figure 4. Gross value added (GVA) of the agricultural sector vs. the recreational, cultural and sports
(RCS) sector in the EU-15 (billion €; 1998-2008)
100
110
120
130
140
150
160
170
180
190
200
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
G
ro
ss
V
al
ue
A
dd
ed
(b
ill
io
n
€)
Agriculture Recreational, cultural and sporting (RSC) activities
Source: Eurostat (2010)
38 J. Swinnen, K. Van Herck and T. Vandemoortele
have already decided to stop selling and using these eggs in their own private label prod-
ucts. Colruyt was in January 2006 the first retailer in Belgium to remove these eggs from its
shelves, and less than three years later all Belgian retailers had followed (Vilt, 2008).
Certification practices are another example. There exists a variety of initiatives and
certification schemes related to environmental preservation, fair trade (see below) and
other issues. Here again the private sector does pioneering work, in collaboration with
NGOs. An example of such a certification scheme is the «Rainforest Alliance» (RA) cer-
tification which aims at promoting good farm management practices for resource conser-
vation, environmental management, and improved labor conditions. The RA certification
scheme has been widely adopted by large multinational companies. By 2007 RA-certified
bananas accounted for approximately 28% of total US banana imports. All banana plan-
tations owned by Chiquita and 84% of the bananas purchased by Chiquita from Latin
America are RA-certified (FAO, 2009). Kraft recently committed to use RA coffee beans
in the production of several of its coffee brands. Unilever – acquiring 12% of the world’s
black tea – committed to buy all its tea RA-certified9.
Similarly, the Forest Stewardship Council (FSC) aims at halting deforestation by pro-
moting sustainable forest management. Between 2004 and 2008, its certified area almost
tripled, and in 2009 it certified approximately 116 million hectares of forests (2.9% of the
global forest surface). In some countries a significant share of the forests are certified (e.g.
Croatia: 95%; Poland: 76% – Marx and Cuypers, 2010).
3.2 Fair trade products
Initiatives such as the RA certification scheme are closely related to the «Fair Trade»
(FT) concept. Consumers buy FT products mainly because these allow small and poor
farmers in developing countries to receive a higher price for their products, enabling
them to improve their lives, send their children to school, etc. In this sense, FT products
fit within the market for care and charity as consumers get a «warm glow« when buying
these products – they draw utility from knowing that they support small and poor farm-
ers by buying FT products. Additionally, FT products also fit in the market for convictions
as by buying FT, consumers reject the purchasing practices of traditional firms.
To date, the FT concept so far is mainly applicable to famers in developing countries
and therefore less relevant for European farmers10. Yet, the evolution of FT is a good indi-
cator for consumers’ interest in experience products. FT products are the fastest growing
segment of food sales. Global sales of FT certified foods reached nearly €2.9 billion in
2008, with tea, cocoa, coffee and bananas enjoying the highest growth11. On average, glob-
al FT product sales expanded by 40% annually over the period 1997-2007 (FAO, 2009). In
the UK, where most detailed data are available from, the sales of FT products increased
from around £30 million in 2000 to £1,170 billion in 2010 – a dazzling increase of 49%
per year (Figure 5).
9 Source: , 10 June 2010.
10 Recently, FT products have originated from the EU as well. For example, in response to the recent dairy crisis,
FT milk brands have emerged.
11 Source: , 26 September 2010.
39The Experience Economy as the Future for European Agriculture and Food?
A recurrent comment is that despite strong growth, the market share of FT retail sales
has remained quite low. Aggregate data seem to confirm this: FT retail sales make up only
slightly more than 1% of total food retail sales. However, this is misleading as FT products
are concentrated in some specific commodities. For example, the sales of FT bananas in
the UK increased from 5% of all banana retail sales in 2004 to 30% in 2008 (Figure 6). In
2009, FT coffee retail sales represented more than 15% of total coffee retail sales in the UK
and FT tea retail sales amounted to 9% of total tea retail sales.
Furthermore, UK consumer awareness of FT products has risen from 20% in 2002 to
70% in 2008. The number of UK consumers buying FT products has followed a similar
growth pattern – from 9% in 2006 to 25% in 2009.
3.3 Organic food products
Organic sales in the UK have grown from around £100 million in 1995 to more than
£1,700 million in 2010, an average increase of roughly 30% per year in sales value (Figure
7)12. Although the share of organic products in total retail sales is limited, data show that
this differs strongly by country and – as with fair trade – by product category. Organ-
ic products account for 1.6% of total food retail sales in the UK and 4% in the US. In
12 The economic crisis may have temporarily slowed or even reversed this trend, but this reinforces the argument
that economic growth is related to the growth of experience products and services.
Figure 5. Fair trade sales and market penetration of fair trade in the UK (mio £, 1998-2010)
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
0
200
400
600
800
1000
1200
1400
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
M
arket Penetration (%
)
Fa
ir
T
ra
de
R
et
ai
l s
al
es
(
£
m
ill
io
n)
Fair trade retail sales Market Penetration
Source: Website: , 30 September 2010
40 J. Swinnen, K. Van Herck and T. Vandemoortele
Figure 6. Share of selected fair trade products in total retail sales in the UK (%, 2004-2009)
0
5
10
15
20
25
30
2004 2005 2006 2007 2008 2009
Sh
ar
e
of
fa
ir
tr
ad
e
pr
od
uc
ts
in
to
ta
l r
et
ai
l s
al
es
(%
)
Coffee Tea Bananas
Source: Own calculations based on Defra (2009), Euromonitor (2010) and Fairtrade Foundation (2010)
Figure 7. Organic food sales and market penetration of organic food sales in the UK (sales in mio £,
market penetration in %; 1995-2010)
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
0
500
1000
1500
2000
2500
1995 1997 1999 2001 2003 2005 2007 2009
M
arket Penetration (%
)
U
K
sa
le
s o
f O
rg
an
ic
P
ro
du
ct
s (
m
io
£
)
UK Sales of Organic Products Market Penetration
Source: Soil association (2011)
41The Experience Economy as the Future for European Agriculture and Food?
France, organic milk sales has grown from 2.8% of total milk retail sales in 1999 to more
than 7% in 2007 (Figure 8).
The share of land allocated to organic farming increased in all EU member states
between 2000 and 2007. In some countries, such as Austria and Sweden, a substantial
share of total farmland is used for organic production.
Retail companies and outlets specializing in organic products have emerged. In the US,
the organic retailer Whole Foods has grown from 19 employees and one outlet in 1980 to
57,200 employees and 296 outlets in 2009. It is currently the ninth largest food and drug
store in the US13. Another example is Bio-Planet owned by the Belgian retailer Colruyt.
3.4 Direct sales of food products
Figure 9 shows the rapid increase in the number of farmers’ markets in the US. In the
period 1994-2009, the number of farmers’ markets, where consumers buy food directly
from farmers, increased from 1,755 markets in 1994 to 5,274 in 2009. Also in the UK,
farmers’ markets have gained in popularity and their number increased from close to zero
in 1995 to approximately 550 markets (with 230,000 stallholders) in 2006 (FARMA, 2006).
3.5 Summary
In the agricultural sector, many different products and services can provide an expe-
rience to the consumer, ranging from products where the experience is only one aspect
in the consumer’s decision (e.g. organic products for which also quality and health con-
cerns play a crucial role) to products and services where the experience feature is the most
important driver (e.g. fair trade products).
A frequent critique of initiatives reviewed here is that these forms of «experience farm-
ing» are marginal in terms of total production and that therefore their impact is margin-
al and irrelevant for the majority of farmers as well. Our documentation of the economic
importance of «experience farming» shows that it is no longer a marginal phenomenon, but
growing rapidly in importance, especially within specific product categories and regions.
Admittedly, figures on the past growth of the «experience economy» do not allow to
make projections about future growth, and more detailed analyses of the main drivers
affecting both demand and supply for experience products and services are needed. Poten-
tial factors affecting the market for experience products and services are demographic
changes, changes in purchasing power, production limitations and policy initiatives. For
example, the financial crisis or specific policy measures such as abolishing subsidies may
affect organic production.
4. Conclusions and implications for EU policy
In this paper, we have argued that a new type of economy is emerging: the «experi-
ence economy». Typically products and services sold in this experience economy contain,
13 Source: http://www.wholefoodsmarket.com/, 9 August 2010.
42 J. Swinnen, K. Van Herck and T. Vandemoortele
Figure 8. Share of organic milk in total retail sales of milk in France (%; 1999-2007)
1.8%
2.2% 2.8% 3.1%
3.5% 3.8% 4.2% 4.4%
4.8% 5.2%
6.6%
7.1%
7.7%
2.8%
3.5%
4.4%
4.7%
5.3% 5.7%
6.3% 6.4%
7.0%
7.8%
9.8%
10.4%
10.8%
0
2
4
6
8
10
12
1999 2001 2003 2005 2007 2009 First
semester
2011
M
ar
ke
t v
ol
um
e
/ v
al
ue
(%
)
Percentage of the total market volume Percentage of the total market value
Source: Agence Bio (2008)
Figure 9. Number of farmers’ markets in the US (1994-2009)
1755
2410
2746
2863
3137
3706
4385
4685
5274
0
1000
2000
3000
4000
5000
6000
1994 1996 1998 2000 2002 2004 2006 2008 2009
N
um
be
r
of
fa
rm
er
s'
m
ar
ke
ts
Source: USDA-AMS - Marketing Services Division
43The Experience Economy as the Future for European Agriculture and Food?
aside from the physical product/service and its quality features, an additional «experi-
ence». These additional experience characteristics positively affect consumers’ willingness
to pay for the product or service, and are intangible at the consumer level – they create a
«warm glow» feeling – but may have tangible consequences at other levels, e.g. by affect-
ing positive or negative externalities.
We have documented that throughout Europe, and specifically its agricultural sec-
tor, the experience economy is growing, creating more income and more jobs. This is in
strong contrast to traditional agricultural activities where employment decreases and its
relative contribution to economic development declines even further.
Hence it appears that there may be (at least) two diverging future growth patterns for
the EU agricultural sector. One pattern is the large-scale, labor extensive and capital inten-
sive production of agricultural commodities as inputs for the food, feed, and fuel industry.
Incomes will have to be raised through increasing productivity, cutting costs, and possibly
increasing prices with increased demand for feed and food, and the growing integration
of the agricultural production system in bio-energy production – all driven by increasing
food and fuel prices in the long run. Here it is crucial for EU policy to support this sys-
tem with investments in R&D and innovation (Swinnen and Van Herck, 2010).
Another potential growth path for European farmers is the experience economy
where consumers are willing to pay a price premium in exchange for various ‘experienc-
es’. Note that these two growth patterns should not necessarily co-exist within the same
region and/or sub-sector and that the relative importance is endogenous to the character-
istics of the region and/or sub-sector. A frequent critique of current initiatives in the agri-
cultural sector is that these forms of «experience farming» are marginal in terms of total
production and therefore only have a marginal impact on the EU agriculture and food
system. However, the rapid growth of for example organic and fair trade sales suggests
that the experience economy may be a future growth area for the agri-food system. While
total food sales of these products are still relatively small compared to the total food mar-
ket, this is no longer the case in specific product markets where they have gained sub-
stantive shares. What is promising for farmers is that experience characteristics not only
relate to consumption or product characteristics per se, but also to production characteris-
tics. This, therefore, may offer substantial growth perspectives and a growing comparative
advantage for European farmers in the medium term.
From a policy perspective, the question arises whether local, national and EU-level
policy can play a role in stimulating farmers to increase the value of their agricultural pro-
duction by focusing on ‘experience’ aspects of their production processes. At the EU level,
some policy support is already incorporated in particular rural development programs.
Examples are programs that stimulate co-operation for developing new products (Axis 1)
and programs that encourage the development of tourist and craft activities (Axis 3).
Hence, in the light of the discussion on the CAP budget after 2013, it appears use-
ful to discuss whether more resources should be oriented towards programs that aim at
assisting farmers and the agricultural system as a whole to reorient itself towards what
appears to be a growth area for the future: the experience economy. These programs could
help farmers to accumulate the appropriate human capital and to develop the institution-
al infrastructure to make the transition towards the experience economy, which can be
an effective way to increase their (farm) incomes. Of course, the question applies here as
44 J. Swinnen, K. Van Herck and T. Vandemoortele
well to what extent specific support policies can drive this type of change and whether the
key factors of a successful transition are not more general policies which stimulate skill
enhancement, innovation and entrepreneurship.
Finally, it is important to acknowledge the important role that the private sector can
play in stimulating growth of the experience economy. Over the past years, the introduc-
tion of various experience standards in CSR strategies of large, international enterprises
has been a catalyst for rapid growth of some specific experience products.
Acknowledgements
The authors wish to thank David Harvey, Louise Knops, Guilia Meloni, Mara Squic-
ciarini and seminar participants in Brussels (CEPS workshop) and Zurich (EAAE confer-
ence) for valuable comments. Further, the authors gratefully acknowledge the comments
and suggestions by the anonymous referees and the editor.
References
Agence Bio (2008). Chiffres 2007: L’agriculture biologique française. Publication de l’agence
française pour le développement et la promotion de l’agriculture biologique. Paris.
Andreoni, J. (1989). Giving with Impure Altruism: Applications to Charity and Ricardian
Equivalence. Journal of Political Economy 97(6): 1447-1458.
Bagnoli, M. and Watts, S. (2003). Selling to Socially Responsible Consumers: Competition
and the Private Provision of Public Goods. Journal of Economic Management and
Strategy 12(3): 419-445.
Bagwell, L.S. and B.D. Bernheim (1996). Veblen Effects in a Theory of Conspicuous Con-
sumption. The American Economic Review 86 (3): 349-373.
Berlinshi, R., Van Herck, K. and Swinnen, J.F.M. (2012). Subsidies and Agricultural
Employment: The Education Channel. Unpublished Working Paper.
Besley, T. and M. Ghatak (2007). Retailing Public Goods: The Economics of Corporate
Social Responsibility. Journal of Public Economics 91(9): 1645-1663.
Darby, M. and Karni, E. (1973). Free Competition and the Optimal Amount of Fraud.
Journal of Law and Economics 16: 67-88.
DEFRA (2009). Food Statistics Pocketbook. Department for Environment, Food and Rural
Affairs.
Euromonitor (2010), Chocolate Confectionery in the United Kingdom and Coffee in the
United Kingdom, Market Reports, Euromonitor International.
Eurostat (2010), Online Database, Accessed September 2010.
Fairtrade Labelling Organizations International (FLO), Annual Reports Period 2003-2010.
FAO (2009). Certification in the Value Chain for Fresh Fruits: The Example of the Banana
Industry. FAO Commodity Studies, Food and Agriculture Organization (FAO). Rome.
FARMA (2006). Farmers’ Markets in the UK: Nine Years and Counting. Sector Briefing
National Farmers’ Retail and Market Association. Hampshire.
Goetz, S.J. and Debertin, D.L. (1996). Rural Population Decline in the 1980s: Impacts of
Farm Structure and Federal Farm Programs. American Journal of Agricultural Eco-
nomics 78(3): 517-529.
45The Experience Economy as the Future for European Agriculture and Food?
Goetz, S.J., and Debertin, D.L. (2001). Why Farmers Quit: A County-Level Analysis.
American Journal of Agricultural Economics 83(4): 1010–1023.
Hartmann, M. (2011). Corporate Social Responsibility in the Food Sector. European
Review of Agricultural Economics 38(3): 297–324.
ILO (2010). Online Database Laborsta, International Labour Organization (ILO).
Accessed September 2010.
Jensen, R. (1999). The Dream Society: How the Coming Shift from Information to Innova-
tion will Transform your Business. New York: McGraw Hill, Inc.
Lans, T., Wesselink, R., Biemans, H.J.A. and Mulder, M. (2004). Work-Related Lifelong
Learning for Entrepreneurs in the Agri-Food Sector. International Journal of Train-
ing & Development 8(1): 73–89.
Marx, A. and Cuypers, D. (2010). Forest Certification as a Global Environmental Govern-
ance Tool: What is the Macro-Effectiveness of the Forest Stewardship Council? Reg-
ulation & Governance 4: 408–434.
Nelson, P. (1970). Information and Consumer Behaviour. Journal of Political Economy
78(2): 311-329.
OECD (2011), Online Database OECD Stats Extracts, Accessed September 2010.
Petrick, M. and Zier, P. (2010). Regional Employment Impacts of Common Agricultural
Policy Measures in Eastern Germany: A Difference-in-Differences Approach. Agri-
cultural Economics 42(2):183-193.
Pine II, B. J. and Gilmore, J.H. (1999). The Experience Economy: Work is Theatre and Every
Business is a Stage. Harvard Business School Press, Boston Massachusetts.
RISE (2009). RISE Task Force on Public Goods from Private Land. Report from the RISE
(Rural Investment Support for Europe) Foundation.
Ronnen, U. (1991). Minimum Quality Standards, Fixed Costs, and Competition. RAND
Journal of Economics 22(4): 490-504.
Soil Association (2011), Organic Market Report 2011.
Swinnen, J.F.M. and Van Herck, K. (2010). Compensation Payments in EU Agricul-
ture. In: Porto, G. and Hoekman, B.M. (eds.), Trade Adjustment Costs in Devel-
oping Countries: Impacts, Determinants and Policy Responses. World Bank. Wash-
ington D.C.
Swinnen, J., Van Herck, K. and Vandemoortele, T. (2012). The Experience Economy as the
Future for European Farmers? Unpublished Working Paper.
The Consumer Goods Forum (2011). Top of Mind 2011. France: The Consumer Goods
Forum.
Tirole (1988). The Theory of Industrial Organization. Cambridge: The MIT Press.
Timmer, P. (2009). A World Without Agriculture: The Structural Transformation in Histori-
cal Perspective. American Enterprise Institute for Public Policy Research. Washing-
ton, D.C.
Van Den Brand, H., Parmentier, H.K. and Kemp, B. (2004). Effects of Housing System
(Outdoor vs. Cages) and Age of Laying Hens on Eggs Characteristics. British Poultry
Science 45(6): 745-752.
Van der Ploeg, J.D., Renting, H., Brunori, G., Knickel, K., Mannion, J., Marsden, T., de
Roest, K., Sevilla-Guzmán, E. and F. Ventura (2000), Rural Development: From
Practices and Policies towards Theory, Sociologia Ruralis 40(4): 529-543.
46 J. Swinnen, K. Van Herck and T. Vandemoortele
Vilt (2008), VILT Newsletter, 03 October 2008.
VLAM (2011). Eierbesteding in 2011. Marketingdienst Vlaams Centrum voor Agro- en
Visserijmarketing (VLAM), Brussel.