The owner of a North Yorkshire supermarket at the heart of a famous row with Tesco over predatory pricing is offloading the store to hard discounter Aldi.

The Proudfoot Group said it was selling the 14,000 sq ft store in Withernsea because it felt it could no longer compete effectively with Tesco - and with a discounter showing an interest in the town it feared being caught between the two.

Joint managing director Mark Proudfoot said the store had never recovered from the impact of a voucher-based deep-discounting campaign run by Tesco in 2004.

Tesco distributed the 40%-off voucher to residents in the town in a move that gained national prominence after critics said it proved that major supermarkets such as Tesco had too much power.

Proudfoot said the Tesco promotion had a particularly big impact on its sales because the retail giant was already offering some of the lowest prices in the country on key branded grocery lines.

"Basically we lost 35% of our sales because of Tesco's voucher offer, and they haven't bounced back," said Proudfoot. "The store is now only contributing half of what it did to the company profits back then."

He refused to reveal the value of Aldi's offer, but said it was a good deal considering the performance of the store and the likelihood that Aldi would open somewhere else in the town anyway. Proudfoot is now in the process of selling off the remaining stock at the Withernsea store and will officially transfer ownership to Aldi on 25 May.

The group, which last year recorded a turnover of £18.9m with profits of £300,000, is aiming to find employment for the 41 staff at Withernsea within the group's remaining five stores.

He claimed the focus would now be on the other stores in the estate, which were all trading healthily.

A spokesman for Tesco denied it was responsible for the exit of Proudfoot from Withernsea.

"It's our strong belief that there is room for all good retailers wherever they operate and that customers will vote with their feet."

Aldi, which has 328 UK stores, is planning to open 40 more stores.

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