As Heineken CEO Jean-Francois Van Boxmeer last week hailed the opening of the firm's brewery with Diageo in South Africa as “a victory for consumer choice”, it is clear that a new battle for supremacy has begun in a country currently dominated by SABMiller, writes Michelle Russell.

Around 200 people attended the opening ceremony of the ZAR3.5bn (US$473m) Sedibeng brewery last week, the centrepiece of Heineken and Diageo’s plan to take on SABMiller in its home country.

It will be responsible for brewing Amstel, Heineken and Namibian Breweries' popular Windhoek brand as well as Smirnoff Spin, Smirnoff Storm and Strongbow Cider.

The facility sits in 83-hectares and builders are already breaking ground on phase two of the brewery’s expansion to raise capacity by a third, to 4m hectolitres, by September 2010.

Talk of a phase three, plans to start brewing Guinness at Sedibeng and even a second brewery are all indications that this is just the beginning for both Diageo and Heineken.

SABMiller currently has around a 90% share of the South African beer market and a 58% share of the country's total alcoholic drinks market, according to the brewer’s own figures.

However, its beer sales by volume fell 3% in the country for the six months to the end of September and the group reported an undisclosed fall in year-on-year market share.

This is a weakness the new brewery will surely target, particularly with the launch just months before the FIFA World Cup kicks off in the country.

Van Boxmeer told attendees: "There is room for competition in the country and that is what we want to bring to [South Africa]. That is the adventure we are engaged in and we believe that South African people want to discover new things.”

And while Nick Blazquez, head of Diageo Africa, has remained polite with regard to its direct competition with SABMiller, labelling them “a great company” with “great brands”, his confirmation that the brewery will “in due course” start producing Guinness is a direct indication of the firm’s planned assault on the South African market…and on SABMiller.

Talk amongst journalists at the brewery opening that SABMiller is “shaking in its boots” following the opening of the brewery may be just that - “talk” - but Diageo and Heineken are clearly in it for the long haul.

Blazquez says its brands offer “something different” and Namibia Breweries, the producer of Windhoek beer that will be brewed at Sedibeng, said it is prepared for the competition that the growing premium market brings.

In March 2007, Heineken hit local subsidiary SAB SA where it hurt when it won back the right to brew and distribute Amstel in South Africa, which had previously been held by SABMiller.

However, Absa analyst Chris Gilmour told the Guardian that we are yet to see “a major face-off” between Heineken and SAB in the country.

“SAB SA has been in decline of late, with margins being squeezed from 25.8% in 2007 to 19.3% in 2009. With the increase in competition, these margins will come under even more strain,” he said.

Other analysts have described the looming battle as “a tussle between two half-ton gorillas”.

SAB CEO Norman Adami told Business Day that he welcomes the competition.

“We have entered a ‘street fight’ that is indeed permanent,” he said.

One of the biggest games in the FIFA World Cup this summer could well take place off the pitch.