Tesco is on course to generate more than £500 million from the sale of locally sourced food and drink sales this year, according to The Times.

Sales of locally produced items such as bread, meat and eggs have risen 40 per cent at Tesco this year, as consumers demand more ethically sourced food.

Tesco launched its local sourcing initiative last year and has 3,000 regional product lines in its British stores.

Commercial director for Tesco Local Willie Hamilton said: “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.”

In other news, Tesco has acquired the UK assets of US entertainment supplier Handelman, which has closed its UK operations due to falling CD sales. Tesco has been working with the supplier since April last year, when it took its operation in-house after axing its supply contract with Woolworths-owned EUK.

It is thought the move could intensify price wars with music specialists HMV and Zavvi.