Bargain stores such as Poundland and B&M saw a 17% rise in sales in the year to July, according to data by Nielsen retail performance, underscoring the fierce competition in Britain's grocery sector.
The increasing threat from budget retailers to the Big Four supermarkets comes as more than 2.2 million households bought from a bargain store for the first time in the past year, with 52% shopping at Poundland.
The growth was partly driven by the sale of fruit and vegetables, which have seen the biggest rise in popularity out of all the products on offer at budget stores - albeit from a low base.
The jump comes after Home Bargains began selling potatoes, carrots and onions.
Around 78% of households in Britain have now shopped at a budget store, making them more popular than German discounters Aldi and Lidl, which are visited by three quarters of households, the report added.
Mike Watkins, Nielsen's UK head of retailer and business insight, said spending growth was mainly driven by a huge rise in first-time visitors and more customers buying products at budget stores that they would normally have purchased at the supermarket.
"People are starting to visit for their regular grocery staples and more experienced bargain store shoppers are becoming interested in adding fresh produce to their repertoire," he added.
"This is similar to what we saw some years ago with Aldi and Lidl, who initially attracted shoppers with special buys for non-food items and low prices on groceries."
The rise in sales also came from bargain stores "removing the £1 straitjacket" and offering more expensive products, the report said.
It added that around 31% of the increased annual amount British shoppers spent at bargain stores came from people shifting spending away from supermarkets and health and beauty retailers.
The Big Four grocers accounted for 73% of spend shifted away towards bargain stores.
The British grocery sector continues to be locked in a supermarket price war, which has seen the supermarket giants slash their prices to protect market share from the rise of Aldi and Lidl.
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