Coles' heavy discounting of its private label products may be seen as a win for shoppers, but an industry group says consumers lose when it results in less product choice.
The supermarket giant announced on Wednesday that it had cut the price of more than 100 of its private label products and extended its discounts on Coles brand milk and bread to its Express stores.
But the Australian Food and Grocery Council (AFGC) said Coles' aggressive promotion of its home brand products comes at a cost to consumers in the form of a rapidly shrinking range of product lines.
AFGC chief executive Gary Dawson said research conducted by Deloitte Access Economics and released by Coles shows that the supermarket chain's product range has dropped by 11 per cent between mid 2010 and mid 2012.
"A loss of 7000 products from a supermarket's overall offering is a significant reduction in the range of choices available to consumers", Mr Dawson said.
"These figures confirm what shoppers report anecdotally - that they often can't find their favourite products on the shelves any more when they go to the major supermarkets.
"The latest aggressive campaign by Coles to promote their private label products is a sign that this trend will continue."
He said reducing the range of products available would also decrease competition which could result in greater market power for the supermarket giants.
"The thousands of suppliers that make up Australia's $110 billion per annum food and grocery manufacturing industry rely heavily on the major supermarkets to get their products to consumers," Mr Dawson said.
But Coles said the AFGC had ignored the report's conclusion that "effective choice in the store is still high and consumers may be better off overall".
It said there were still 55,000 products available in Coles and 75 per cent of them were branded products.
Coles merchandise director John Durkan said customers would ultimately decide what products they wanted to buy and could simply shop elsewhere if supermarkets did not stock what they wanted to buy.
"It is about time the AFGC became a more professional body that actually represents all of its members, many of whom have seen substantial sales gains from products sold at Coles that customers buy the most," he said.