The store will be built in Station Road on the site of a former petrol station and car wash.
The Co-op says the investment will create 25 extra jobs.
Planning permission was secured in 2014 but the Co-op only confirmed this week that work had started as the site.
A spokesman for the Co-op, said: “We are delighted to be making such a significant investment in Sutton on Sea.
“Opening in 2017, the new store will have a focus on fresh, healthy foods, food-to-go, award winning chilled wines and meal ideas.
“By the end of the year, our stores will have reduced prices on over 1,000 everyday essentials, including the introduction of its 75p farmhouse loaf and pruning the price of over 100 lines of fresh fruit and vegetables.
Students in Sutton, who hold a NUS extra card, will also receive a 10 per cent discount off their groceries in the store. The popular food retailer is also looking to ‘give back’ to the community. They are set to appoint a Community Pioneer, a member of their food store team who will be working to foster involvement in community activities, from local fundraising to working with charities, schools and voluntary organisations.
The spokesman added: “Our aim is to establish the store as a local hub and we are looking forward to the opportunity to serve the community and make a positive contribution to local life.”
Confirmation of the Co-op deal comes a week after WHSmith moved into the town.
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