Between the lines: Uncorking the new challenges

There are several key points on which the wine industry seems to agree in the wake of this week's marriage of the nation's two largest wine producers, Montana and Corbans.

First, that it was widely expected. The only company that could really leverage off synergies that the Corbans operation provided, and had the most aching need to increase capacity, was Montana.

The Australians had teased, poked and prodded at both Montana and Corbans, but in the end Corbans had not made its brand name resonate or developed distribution channels that would be of any use to a foreign concern.

The second common thought is that Corbans - and owners DB - could have worked their wine resources considerably better. Opinions of wine are highly subjective, but few rate Corbans wine as lower in quality than Montana product.

Whether Corbans is allowed to retain its brand name or not, its earnings will improve not with better product but with better marketing and distribution, and a management solely focused on building export markets.

Thirdly, there is absolute agreement in the industry that Peter Hubscher is pivotal to the success of Montana, and that a person with his depth of wine knowledge and breadth of corporate nous will eventually be hard to replace.

But there are other areas of polite debate that have surfaced from this most comfortable of unions.

Will Montana take all of Corbans or pick through what it needs and discard the rest, including staff, assets, growers and brands? It seems inevitable that streamlining will occur, but with Montana's $70 million expansion plan, and unsatiated overseas demand, there may be more of use than not in the remnants of Corbans.

What of Lion Nathan? There is no doubt the relationship between Montana and its largest shareholder is somewhat less than cordial. As one broker said, "[Lion] had to have an astounding 28 per cent of the company before it even got one member on the board of directors!"

Some commentators are still staggered that the Commerce Commission found that the merger would not result in market dominance.

The combined entity will have around 62 per cent of the domestic market and more than half the export market, and there has been some speculation that growers will be disadvantaged at not being able to play one producer off against another.

But perhaps the most salient question for the industry as a whole is whether our biggest player will be big enough to compete meaningfully in the world? We still represent just 0.2 per cent of the world's wine production. Large Australian wine producers such as Southcorp produce more than the entire New Zealand yield in one year.

But Montana does not aspire to compete with the Orlando Wyndhams of the world - except on quality. It has been one of the few trailblazers with enough clout and capital to foster New Zealand's precious niche position as a quality international player.

The challenge for Montana is to take the skill base and unique style of Corbans and integrate those resources seamlessly to advance the company's, and the country's, international marketing thrust.