Waitrose has pulled out of plans to build a store on the former Bilton Social Club site.
The upmarket chain had intended to build a 20,000 sq ft supermarket with developers Discovery Properties.
My hope is that they will still consider coming to Rugby and look at alternative locations, ideally within the town centreCllr Yousef Dahmash
The proposed store would have created around 150 jobs.
Despite Waitrose backing out of the plans, Discovery Properties is keen to find another supermarket to set up on the site.
A Waitrose spokesman said: “It is not a decision we have taken lightly; our intention was always to reach an agreement with Discovery Properties and deliver a quality food store which would make a positive contribution to the area.
“We are grateful to Discovery and the council’s planners for all their efforts, but following changes in trading conditions across the supermarket sector and shifts in customer shopping patterns, we reviewed our plan and have decided not to progress further at this time.
“We are sorry for any disappointment and would like to thank everyone who gave us their feedback during the consultation.”
Cllr Yousef Dahmash, who represents Caldecott, hopes Waitrose will consider another location in Rugby.
He said: “The recent announcement is disappointing, particularly as I know that the developers were working hard with Waitrose to address concerns that the new store may increase congestion in Bilton
“Rugby is a growing, vibrant town and I know that many people were enthusiastic at the prospect of a local Waitrose store.
“The general feedback I received was positive with people recognising that the store would be good for the village, would contribute significantly to the local economy and create many
“Although Bilton was Waitrose’s preferred site, my hope is that they will still consider coming to Rugby and look at alternative locations, ideally within the town centre.”
Rugby MP Mark Pawsey said: “Waitrose would have been a welcome addition to the retail offer within Rugby although when the proposals were announced I did have some reservations regarding the choice of location.
“I have been in contact with the company and expressed my wish that they still consider opening a local store and that they explore the possibility of using a site within the town centre which would support our high street.”