Competition in the supermarket bakery sector is set to intensify as fast-growing discount chain Lidl rolls out in-store bakeries (ISBs) across the UK and Ireland.

The German retailer, which has over 580 stores in the UK, has already completed stage one of the project, installing ISBs in 75 stores in its north east sales region, bringing its total number of outlets with ISBs in the UK to 90.

It now plans to roll out the concept to other sales regions in the country. Lidl is also opening ISBs in the Republic of Ireland, with most of its 130 stores there expected to have a bakery by the end of the autumn.

The roll-out will put further pressure on the major supermarkets, which are already growing more slowly than the discount chains.

According to Kantar Worldpanel data (12 weeks ending 10 July 2011), Lidl’s sales are growing at 15.6% compared to just 5.6% at Morrisons – the fastest-growing of the traditional big four supermarkets.

Matthias Queck, a Frankfurt-based research director at research company PlantRetail, said that Lidl’s ISB initiative followed similar moves by the retailer in other European markets.

“Lidl sees ISBs as a tool to attract more affluent customers and a step closer to offering a complete one-stop-shop for people," he said. "They help move Lidl into the mainstream because consumers are used to seeing ISBs in supermarkets like Tesco and Sainsbury’s.”

After piloting ISBs in various location around the UK last year, Lidl began installing bakeries in its north-east stores in January. Stores are supplied with frozen, parbaked products from Lidl’s distribution centre in Newton Aycliffe, Durham.

The range includes bloomers, multigrain loaves, tiger bread, stone-baked baguettes, pumpkin seed rolls and all-butter croissants among others, with prices generally slightly below those of the big four supermarkets. Further lines will be added later this year, said a spokesperson.

Products are baked off on rotation, using Wiesheu ovens at least four times a day. “[This ensures] maximum freshness for our customers, whether they visit our stores first thing in the morning or on their way home from work in the evening,” said the spokesperson. “At Lidl, we believe in giving our customers a fantastic range of fresh products of excellent quality. Bread and pastry products baked in-store daily is the next step.”

According to Kantar Worldpanel, total sales of bakery goods in ISBs grew 1.9% year on year in the 52 weeks to 11 July, while volumes fell 2.9%.