The German chain said shoppers transferred £58m worth of spending away from Waitrose, M&S and the big four - Tesco, Asda, Sainsbury’s and Morrisons - to Lidl in the run up to Christmas.
The discounter saw a 33 per cent rise in sales of its premium Deluxe range over the six weeks to December 30, with bestsellers including brioche burger buns and luxury mince pies.
The update comes as Lidl prepares to open its new Doncaster distribution centre on January 31.
The warehouse will be Lidl’s 13th in the UK and follows the opening of a new Lidl store in neighbouring Rossington, on January 10.
Lidl said the new regional distribution centre will provide a boost to the local economy with the creation of hundreds of new jobs.
Recruitment has been under way for both the warehouse and the Rossington store, with Lidl welcoming hundreds of new employees into its workforce.
The firm said employees at the warehouse and the store will benefit from an increase in pay, after the group announced that it would once again match the voluntary living wage, as recommended by the Living Wage Foundation.
The new salaries of £9.00 per hour, will come into effect from March 1 and will be 10 per cent higher than the Government’s National Living Wage. Employees will also receive a comprehensive benefits package including company pension scheme, employee discount and an enhanced holiday entitlement.
Tsvetelina Butrakova, Lidl UK’s regional director, said: “It’s an incredibly exciting time for us here at Lidl, as we prepare for the opening of our new warehouse.
“I am incredibly proud of everyone that has played such a significant role in getting to this point, and I’m excited about welcoming all of our new colleagues into the Lidl family over the coming weeks.
“We are so very grateful to the local community for all of their support and look forward to getting to know our new neighbours, as soon as we are up and running.”
The Doncaster distribution centre is part of Lidl’s commitment to invest £1.45bn in Britain.
In its festive update, Lidl reported strong growth in alcoholic drinks, with a market-leading 18 per cent increase in beers, wines and spirits.
Sales of its Deluxe turkeys, which won a Quality Food Award, more than doubled.
Christian Hartnagel, Lidl UK chief executive, said: “We have continued to expand our footprint across the UK over the past year, and it is no surprise that this contributed to more customers than ever before shopping with us in December and over the Christmas period.
“In the context of a tough trading environment facing all grocery retailers, we are particularly pleased with the performance of our Deluxe premium range of products, which registered strong sales increases and proved a major draw for new and existing customers.”
The retailer is the latest to update on a busy Christmas period in which shoppers spent £29.3bn on groceries in the UK.
According to Kantar Worldpanel, two in three households shopped with either Lidl or its fellow discounter Aldi during the holidays, putting greater pressure on other supermarkets to maintain market share.