Chile could be the greatest threat to Australia's wine image in the UK, according to industry experts.
Australia still leads in off-trade sales but its wine industry is increasingly dogged by problems with oversupply and a growing consumer image of being a mainstream bulk producer.
"Australia is becoming a victim of its own success," said Michael Cox, director of Wines of Chile. "Over-production is now a fact of life and it is seeing a dilution of its image with many wines at the lower price points. It is seen as homogenous even though it does produce really diverse wines."
Cox said Chile is taking a lot of the high ground from Australia and the future for all producers was the key £5 to £15 category, as well as in rosé. "I think Australia will really have its eye on Chile at the moment," he said.
Compared to Australia, Chile sits further down at number seven in the UK off-trade behind Spain, but some retailers are seeing signs of increased consumer interest in this region.
Tim How, MD of Majestic Wines, said: "Chile is one of our biggest growth areas and will be one of our main areas of focus over the next few months."
Majestic, which last week reported annual sales up by 6% from £162.5m to £172.2m, has Chile in third position in terms of sales, behind first place France, and second-place Australia.
"Chilean wine accounts for 9% of our business, up from 8.5% on a smaller base last year," said How. He said Chile has overtaken Italy to rank third place.
Cox said: "Majestic has a good range of Chilean wines, especially in the £5 to £15 premium sector. Supermarkets like Waitrose are also leading the field and Tesco has begun to recognise the diversity of Chilean wines at the higher price point."
Tesco stocks two dual varietal Chilean wines in its Finest range, priced at £7.99, and Oddbins, which has also added to its range, has seen sales shoot up over the industry average, according to Cox.