President of the Returned and Services League in Australia Rear-Admiral Ken Doolan labelled the Woolworths campaign "unfortunate".
"I think they have taken the right action ... pulling it down," he told Network Nine.
"There is a very fine line to be judged here, where you are dealing with such sensitive issues and the Australian public speak very clearly and very loudly when that fine line is crossed.
"On this occasion unfortunately it was crossed, it was insensitive, it has been taken down."
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The online campaign caused outrage among customers, who accused the supermarket giant for cashing in on Anzac Day.
"Fresh in our Memories" invited Australian consumers to create a profile picture and cover photo for their Facebook page, in memory of past and present servicemen and women, complete with the Woolworths logo.
However, the supermarket has since been forced to pull its campaign after consumers branded it as "disrespectful" and "disgusting", while others flooded social media with their own versions of the Woolworths generated images.
The campaign was launched just last week in the lead up to the centenary marking the landing at Gallipoli.