By Alex Mitchell and Jack Gramenz

Coles has stared down allegations it is muscling smaller competitors out of the supermarket game, denying it creates its own brands for products to control even more market share.

Fronting the consumer watchdog’s supermarket probe on Thursday, representatives from the sector heavyweight labelled Australia’s grocery market “highly competitive” and denied it was gouging customers through high prices.

The Australian Competition and Consumer Commission describes Coles, along with powerful rival Woolworths, as an oligopoly that controls 67 per cent of the national market.

Coles representatives were grilled on their range of in-house products, which make up one-third of the company’s more than $40 billion in annual sales.

While some products are Coles-branded, others – such as Koi bodycare items, Nature’s Kitchen food items and Urban Coffee Culture coffee – are less clearly supermarket-owned.

Consumer group Choice earlier told the inquiry the practice could increase choice and lower prices in the short-term, however it could crowd out competitors in the long run and leave Coles products as the only, more expensive option.

But Coles chief Leah Weckert denied the products were launched to undercut previous suppliers.

“Two-thirds of our sales are still proprietary products, they’re a very important part of our offer, and we know that’s why many customers come and do their shop with us,” she said.

“Our view would be the business model that we have will have an important role for both proprietary products and own-brand products for the foreseeable future.”

Executives also denied a lack of clear labelling to show a product was Coles-owned was a transparency issue, because the supermarket’s name would still be listed somewhere on the item.

The ACCC has separately accused Coles and Woolworths of deceptive pricing behaviour, launching legal action against them for allegedly misleading customers with fake or misleading discounts.

Earlier, Coles leadership defended the firm’s increasing revenues and profit margins, suggesting it was not immune to economy-wide pressures such as rising rents and energy costs.

Coles supermarkets earned $2.02 billion before tax in the 2023/24 financial year, up from $1.77 billion a year earlier.

Its pre-tax profit margin increased from 4.8 per cent to 5.2 per cent.

Ms Weckert said global supply-chain issues meant suppliers had charged more in recent years and the business was not immune to broader economic factors such as staff wage increases, rent hikes and growing energy costs.

But she accepted Coles had a job to do in rebuilding trust with fed-up customers who were sick of paying more for household essentials.

“The increases in food prices have actually been lower than what we’ve seen in the vast majority of other OECD countries … that would point to the fact that actually, there is very strong competition here,” she said.

Choice told the inquiry customer trust in supermarkets had plummeted due to their huge profits while grocery prices increased.

Counsel assisting the inquiry Naomi Sharp questioned Coles’ increasing profitability in those circumstances.

“Coles’ profit has increased, both in dollar terms and percentage terms, and against that … suppliers say they’re being squeezed, consumers say they’re being squeezed,” she said.

Mirroring Woolworths – which said niche retailers such as the Cheesecake Shop, Nextra Newsagents and 7-Eleven were competitors – Coles said the commission’s competition metrics were too narrow.

Ms Weckert confirmed Coles charged a “freight premium” on prices at its remote stores and could not point to any measure to offset customers being forced to pay more for food in those areas.

The commission previously found that a site’s distance from a central location could be another barrier to competition as it made it harder for rivals to enter the local market.

The inquiry’s final report is due in February.

Supermarkets charge more for unpackaged fruit and veg