Tesco is Britain's grocery market leader with a share of 27.4 per cent, while Aldi and Lidl have increased their combined share to 13.1 per cent, according to the Kantar Worldpanel data.
Scores of jobs have been created in Chatteris as Tesco opens its first Jack's discount store..
Most products will be Jack's own brand and the chain will have 2,600 product lines, compared to tens of thousands in most Tesco stores.
Some 350 Tesco suppliers are involved in Jack's.
The UK's biggest retailer invited reporters to join chief executive Dave Lewis at its site in Chatteris, Cambridgeshire, on Wednesday.
The Jack's branding (the is name a nod to Tesco founder Jack Cohen) states it will offer "great-tasting food at the lowest possible prices", promising that eight out of 10 food and drink products will be grown, reared or made in Britain.
He said: "Jack's will need to work hard to dent the success of Aldi and Lidl, and will also need to prove its value against the wider Tesco offering including its existing chain of One Stop convenience stores".
Tesco, Sainsbury's, Asda and Morrisons have all been forced to slash costs and close unprofitable stores to fund price cuts on everyday essentials where competition from discounters is heaviest.
"Aldi and Lidl both successfully compete in the retail sector by using a consistent layout in custom-built stores with a supply chain that sources items from suppliers across Europe".
"The staff in the new stores are on different terms and conditions to other Tesco staff, which involves a higher hourly rate but fewer other employment benefits".
"If there is an offer that has an appeal in the marketplace it's important that we, as Tesco, through Jacks, give that to the local market".
"However, they spend just £1 in every £10 there and don't shop at the discounters as frequently as at the big four - given the Jack's model is so similar we would expect to see shoppers behaving the same way in its stores".
We met John, who has worked at Tesco since 2007, in the carpark.
The launch of Jack's is part of Tesco's centenary celebrations which will see the business mark 100 years in 2019.