The discount chain is named after Tesco’s founder, Jack Cohen, who created the business nearly 100 years ago.
Tesco said that the chain will “operate a low-cost business model” that aims to keep costs low and prices down.
Over the next six months, Tesco will launch 10-15 Jack’s stores in the UK, with the first two stores to open on 20 September in Chatteris, Cambridgeshire, and Immingham, Lincolnshire.
Tesco said that the majority of Jack’s food and drink products will be "grown, reared or made in Britain” and it will also stock an own brand range.
Dave Lewis, Tesco Group Chief Executive, said: “Jack Cohen championed value for customers and changed the face of British shopping. He’s an inspiration for all of us and that same spirit still drives Tesco now.
“It’s fitting that today, we mark the beginning of Tesco’s celebration of 100 Years of Great Value by launching a new brand, and stores bearing his name: Jack’s.
“Great tasting food at the lowest possible prices with 8 out of 10 products grown, reared or made in Britain.”
Today, Tesco is Britain's biggest grocery retailer with a share of 27.4%, while Aldi and Lidl have a combined share of 13.1%, according to data from Kantar Worldpanel.
John Perry, managing director of SCALA, added: “With discount retailers Lidl and Aldi reported to control around 13% of the UK grocery market, it’s no surprise that retail giant Tesco has launched its own discount chain, Jack’s.”
“Hoping to capitalise on the desire from consumers for cheaper produce and greater convenience, mainstream retailers have been battling for this extra market share since German chains Lidl and Aldi’s popularity has continued to soar.
“Our UK Logistics Report highlighted some of the ways in which mainstream retailers are attempting to compete with the discount stores, including the streamlining of product ranges. The typical discount retailer has 7,500 SKUs (stock keeping units), compared to 30,000 for a traditional supermarket.
“Prior to the rumoured launch of Jack’s, Tesco said it would remove up to 30% of its product lines as part of its Project Reset. But, it seems, another way to beat the discounters is to play them at their own game.
“The habits of customers in the grocery sector are also changing, with an increasing move towards ‘little and often’ purchasing. In response, Tesco seems to be further developing its Metro and Express models to incorporate customer demand for convenience and competitive pricing.
“Only time will tell as to whether Tesco’s discount venture takes off. However, it is undeniably an innovative move that’s sure to apply further pressure to the other mainstream retailers.”