Westaway is expecting to sell 400,000 sausages through the stores by the end of the year, it said.
The deal is the result of an approach by the Co-op to the Newton Abbot-based business in mid-June, Westaways' managing director Charles Baughan said.
"To our mind they are the perfect customer for us as they have great distribution across our marketing area, and at least one store in every postal area," he said.
"The business has grown well over the summer and we now serve around 300 stores with two lines and this has given new sales of around 3,000 - 5,000kg a week.
"We are now launching a further two lines, namely Traditional Hogs Pudding and a Pork, Apple and Thatchers Cider Sausage. We are also looking ahead to promotional activity around British Sausage Week in early November and seasonal ranges for Christmas."
The partnership reflects the Co-op's ambition to be recognised as a leading local food retailer in the UK.
Westaway has full access to the Co-op's sales data and has a full-time in-house analyst who will use the data to highlight good performance and investigate poor performance.
"This works particularly well when combined with our Westaway field marketing teams who work at store level sampling and building awareness of Westaway sausages in store," added Baughan.
"However, the best bit of all is that we have a useful and dynamic relationship with the Co-op and marketing teams who are committed to ensuring the message about local food being sold in local stores is being driven home and championed by their staff."