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Wine is important to the Portuguese economy, and the United Kingdom is one of Portugal's oldest and most important wine markets. Yet the Portuguese are rapidly losing their share of the UK market, and have already been overtaken by Australia, Bulgaria, South Africa, the USA and Hungary. This paper reports a study of the Portuguese wine industry in the context of the UK market using Porter's structural analysis model as the analytical framework. Data were collected via depth interview with executives closely involved in the wine trade, in Portugal and the UK. It was found that Portugal's traditional source of competitive advantage, low costs as a consequence of low wages, has been eroded. The absence of any other cost advantage, low investment in products and markets and a lack of scale economies are exacerbated by production‐led convictions that Portuguese wine is best — it is just that the customers do not appreciate it. Meanwhile the customers perceive a lack of reliability in quality, lack of the ability to consistently deliver the required quantity and fluctuating prices. Portugal needs a consistent strategy for sustainable competitive advantage; some alternative strategies are discussed.
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