In a classic David fending off Goliath tale, New Zealand's Montana is trying to manoeuvre its business interests in various ways to avoid Lion Nathan's hostile takeover plans. David Robertson, in an exclusive interview with LN's CEO Gordon Cairns, reports on how the boardroom war is being waged.

The battle for control of New Zealand's largest wine group, Montana, is just getting exciting as David attempts to fend off Goliath.

Lion Nathan, which makes Castlemaine XXXX and Steinlager, has been increasing its stake in Montana all year, initially to 19% and then, in stages, to 28.2%.

Two weeks ago it announced its intention to go for 51% but Montana has been decidedly lukewarm in its response.

Montana chairman Peter Masfen, who owns 20% of the company, has repeatedly said he thinks Lion Nathan is getting his group on the cheap and Masfen launched his own bid for control of Montana earlier this week.

Analysts seem to believe his attempt to control 51% is doomed - it would cost NZ$253m - and is really a not-very veiled attempt to force Lion Nathan to pay more.

Lion Nathan's Hahn Ice brewery

But Lion Nathan CEO Gordon Cairns told in Sydney on Monday that he had no intention of missing out on Montana.

"I would like to own them," Cairns said.

When asked why he thought Montana executives do not seem happy at the thought of Lion Nathan owning their company, Cairns shrugged and diplomatically replied: "I think they are a great company."

Cairns believes consolidation is inevitable in the global drinks market and seems to want Montana to practice Lion Nathan's move into wine - next stop Australia's somewhat lost Southcorp?

"There are a number of things we can bring to Montana not the least of which is scale."

"If you look at liquor companies around the world they are all arriving at the same conclusion. We are in the 'share of throat' business so if you are going to diversify into other industries it is better to go to one that you know and we think we know the consumer who drinks beer, wine and spirits."

"The world is consolidating and smaller companies will get taken over by larger companies. You have to crawl before you walk and we are in an early learning stage of things with wine. There are a number of things we can bring to Montana not the least of which is scale because we already have got a billion dollar business in Australia. There are also savings in certain areas like purchasing so we think there are benefits to both."

The cuveé room of the Brancott Winery

Montana Brancott is the biggest wine company in New Zealand and with its NZ$151m purchase of Corbans, the second biggest, two months ago it is looking to build on its export potential.

But what will the company's strategy be after beating off all rival competition in its domestic market? spoke to Montana MD Peter Hubscher about his plans.

"Any company today has to choose an internal focus which is becoming much harder with more free trade or an international focus," he said.

"We have took the view some time ago we would be an international brand, we want to be the New Zealand wine people drink."

Montana is a major exporter into the UK and is looking to boost its sales into the US where it goes by the Brancott label. Hubscher believes that consumers in these markets are happy to try new world and overseas wines but they are choosy by country not brand. He believes that Montana is now placed as clearly the wine that people in international markets will associate with New Zealand.

"People are drinking this Australian wine or this Chilean wine etc. People experience across countries rather than brands. There will be a much smaller number of people who will choose by brand and they will be the specialists anyway.

"New Zealand needs a company that could be what people turn to for a representative taste of our wine and with the Corbans acquisition it enables us to fulfil that market. If we couldn't do that then New Zealand would not become a choice."

Another important factor in the acquisition has been creating the critical mass to attack the important grocery trade in Europe and North America.

"If Tesco in the UK need a New Zealand brand they can come to us because now we are the core with an umbrella of brands. That will be the way of the future with retailers requiring size and we didn't have that - we still don't have enough.

"With the concentration of purchasing power with the grocery outlets getting larger is important because if you cannot guarantee supply they will not deal with you."

"We have took the view some time ago we would be an international brand, we want to be the New Zealand wine people drink."

Following the Corbans deal, Montana does not expect to be making further acquisitions - its position in New Zealand is unassailable. But it does need to be bigger. For that reason it is engaging in a massive planting programme that is adding vineyards at a staggering rate.

Montana has also decided to stick to its strength and avoid competition with the cheaper Australian brands. "You will not be buying a New Zealand wine for £4 in the UK. We will not be competing with the Australians in that market. We will keep our prices above £5 to reflect the premium we believe the quality of New Zealand wines deserves. We also don't have the climate suitable to produce the quantity of grapes needed.

"Our problem at the moment is we just don't have enough supply. We have to make sure what we are planting is sustainable but we do need more production."

Montana's strategy seems to be one of consolidating its position as the brand people in overseas markets will choose if they are looking for a New Zealand wine. The company will continue to target the supermarkets as a retailing outlet but in order to develop sales it is planting like crazy.

Montana is in a fortunate position where it seems to have demand but not enough supply but Hubscher will have to balance expectation so when he has enough supply he hasn't run out of demand.