Tesco has cancelled plans to redeem Superquinn vouchers in its own stores, following problems administering the offer.

Tesco, the largest supermarket chain in the State, had decided to accept vouchers issued by Superquinn in a bid to stem a new competitive challenge from its smaller rival. Superquinn last week began to issue books of saving vouchers worth €100 to customers who spent more than €65 per transaction. The move marked the first competitive push from Superquinn since it was taken over by Select Retail Holdings last August.

Tesco responded to the initiative, saying it would accept the vouchers, many of which relate to products sold in its stores. A spokeswoman for the firm confirmed yesterday however, that the decision had been rescinded, with Tesco deciding to concentrate on lower pricing instead.

The spokeswoman confirmed that it would have been "impossible" to accept and process the Superquinn vouchers. She said the difficulty related mostly to differences in barcoding between the two supermarket chains. "It was purely technical from our perspective," the spokeswoman said.

Select Retail Holdings chief executive Simon Burke said the company was "very pleased" at the development. We were interested to see how much of a reaction we got from them," he said.

Superquinn is now planning to bring out a second booklet of vouchers with a later expiry date.

Mr Burke revealed that Superquinn had been aware of the possibility that Tesco or Dunnes could offer to accept its vouchers and had designed them in such a way as to make this difficult.

Each voucher, for example, had a different barcode, with the result that a competitor would have needed to set up 100 new barcodes to accept them. The company also included a large number of products that are only available at Superquinn.

When asked how Tesco would address Superquinn's competitive push, its spokeswoman said: "Tesco has always been committed to bringing down prices. That's the area we'll focus on."

Price wars have become a prospect in the wake of the Government's decision to abolish the Groceries Order. The order banned below-cost selling. Superquinn also plans to invest €63 million revamping its 21 stores over the next three years, and will launch the first refurbishment in Blanchardstown in January.

The most recent TNS figures for market share in the Republic showed that Superquinn's share has fallen to 8 per cent from 8.5 per cent. Tesco meanwhile, has 26 per cent of the grocery market.