The producer of the Oyster Bay wine brand, Delegat's, has predicted that New Zealand's wine surplus will continue to cause the industry headaches for the next two years.

Vineyards will lose their value and grape prices are unlikely to rise in the near-future, Delegat's MD, Jim Delegat, said at the company's annual general meeting last month. Delegat's has this week begun the final stages in its acquisition of Oyster Bay Marlborough Vineyards in order to protect grape supplies for its Oyster Bay brand.

Oversupply has threatened to damage the value of New Zealand wines in key export markets since the industry reported a bumper harvest in 2008. Grape prices have subsequently slumped and, with them, profits.

Trade body New Zealand Winegrowers has said it is increasingly optimistic about the sector's prospects following successful efforts to rein in the country's grape harvest in 2010. But, Delegat said that recovery remains some way off.

"Whilst the 2010 New Zealand wine industry harvest was a lower yield of 266,000 tonnes, the group is of the opinion that the industry supply imbalance is likely to prevail for another two years," he told shareholders. He claimed that "low price private label wines now account for five of the top ten best selling New Zealand wines in the industry’s largest export market, the UK".

Impairment charges caused Delegat's net profits to sink by 99% to just NZD177,000 (US$125,000) for the year to the end of June 2010. But, the group said that it is upbeat on its current fiscal year. Sales and operating profits are ahead of expectations, it said.