Tesco is on course to generate more than £500 million from the sale of locally produced food and drink this year as Britain’s biggest retailer cashes in on a surge in demand for regional products.

Sales of locally sourced goods such as bread, meat, apples, eggs and rape-seed oil have risen by 40 per cent at Tesco this year as increasing numbers of consumers shun big brands.

Tesco launched its local sourcing initiative last year and at present stocks 3,000 regional product lines around Britain.

According to Willie Hamilton, the commercial director for Tesco Local: “We set ourselves very stretching targets to get to £1 billion in sales of local products by 2011. People are cash-strapped but our numbers are bang on target. Some 84 per cent of our customers are saying that they would like to buy local lines. It’s a fantastic opportunity and that’s why we’re investing so much.”

One Wolverhampton-based company could supply Tesco with a million packets of pork scratchings this year after selling out in stores across the Midlands in a matter of weeks. A baker in Forres, Scotland, supplies four stores with favourites such as softies and butteries, while a farmer in the Isle of Wight sells 1,250 eggs a week in his local Tesco after walking in and asking if they fancied “a few”.

Tesco’s success reflects a boom in demand for locally sourced products. The Institute of Grocery Distributors (IGD) estimates the market to have grown 15 per cent to £4.3 billion in the past three years and believes that it could be worth £5.7 billion by 2012.

Other supermarkets are investing millions of pounds in attracting local suppliers, with J Sainsbury running a Supply Something New partnership with Food from Britain. Under this initiative, Sainsbury’s sells Cornish camembert in the South West, Pont Gar cheese in Wales and Lincolnshire poacher cheese in its East Midland stores.

Michael Freedman, the IGD’s senior consumer analyst, said that more people were buying locally branded food in the belief that it was fresher, supported local communities and helped the environment by cutting food miles.

He said that while demand for local products was highest in the South West, East Anglia and Scotland, nearly two thirds of customers in London claimed that they were keen to buy more regional produce.

Joanne Denney-Finch, the chief executive of the IGD, said: “The economy is affecting most people’s food choices, but not just in a simple and obvious way. In these tough conditions, many people are keener than ever to support nearby jobs through their spending choices.

“Others are reducing their travel costs by making greater use of shops in the vicinity. Both of these factors favour local food.”

Times Recommends

• Lloyds TSB wins vote for HBOS merger
• Bank of England discussed 2% rate cut
• Woolworths dives as it confirms takeover talks