The issue drew a sharp response from Twitter users, including the minister.
Colin Jackson said he would avoid the brand from now on.
Another said that Pernod Ricard, which makes the wine, is taking a gamble.
"Says it all when they think cheap plonk wins out over brand and NZ identity. Pity," Ren Hamington said.
However, Kiwi wine columnist Dennis Knill said although Campbell was respected, he's "not God" of wine and the alcohol giant was allowed to aim for a profit.
"Bob Campbell, whilst he's probably the first in New Zealand to have a masters in wine and knows his stuff, really needs wake up and smell the coffee. There's a thing called profit, and it's not a dirty word. Montana have every right to try and produce a product under $10.
"A lot of New Zealanders are not wine connoisseurs and they don't appreciate the best that money can buy and are happy to drink a wine that's chilled in the fridge that's good enough for the average punter."
Knill said Pernod Ricard "have every right to make money, that's what it's all about basically".
Knill said using Australian grapes "wasn't the end of the world, there's nothing wrong with Australian sauvignon blanc".
"I agree it's perhaps not as good as New Zealand but it's good enough for a lot of people."
Another reader responded by saying, "top marks to Montana for identifying the market demand ... affordable quality".
But Justin Hammond said he would "never buy the wine again".
Pernod Ricard New Zealand managing director Kevin Mapson said yesterday that increased demand and the rising costs of New Zealand grapes meant it was increasingly challenging to produce New Zealand-sourced wine that could be sold for under $10.
"By sourcing grapes from Australia, we can continue to make wines of the quality that Montana consumers expect at the same price point. This sourcing transition only applies to the Montana Classics and Montana Affinity ranges. All the other Montana ranges will continue to be made from New Zealand grapes," Mapson said.
He said the company had worked hard to minimise the change in style but said it was true Australian sauvignon blanc was less "aromatic" than that from Marlborough so would seem more "subdued", but disagreed the grapes were inferior to New Zealand's.
Mapson said the company had adhered to all the legal requirements for labelling so consumers were aware of the country of origin and were communicating the change to trade customers.
Over time, most of the Montana Classic and Affinity wines would be made from Australian grapes, he said.
