I was in the supermarket the other day and found myself looking at the price of a tin of baked beans. No, I have not become a sad individual thinking of things to fill up my day. I have plenty to do, thank you. And I am really worried.

The overwhelming strength of our larger retailers is leading to reduced consumer choice, increased prices and stifled competition. They will tell us that we have more choice than ever, but if trends continue, then the largest of them all could very well become uncontrollable. We, the public, are being taken to the cleaners while the supermarkets are cleaning up.

Let’s start with the simple facts.

A 415 gram tin of Heinz Baked Beans costs 41p at Tesco.

Tesco’s Value baked beans, for a 420g tin, are 13p.

Is that all? 13 pence? That’s amazing.

It is the equivalent of 99p per kilogram for the Heinz beans and 31p per kilo for the Tesco’s Value baked beans. The difference in pricing is quite staggering for such a basic and ostensibly cheap, generic product. However, the underlying issues are even more astounding.

Think of it this way. The own label brand of goods is very cheap. Tesco spends no money on advertising, packaging or special promotions. Thus a layer of expense is removed. I don’t know whether the quality is as good as the premium brand, but let’s assume, for the moment, that it is. Yet if you are on a mission to buy a can of baked beans, unless you are a student or particularly cash conscious, you would not buy the Tesco "Value" brand... right? You would buy Heinz, probably. Why? Because they have marketed it to you and you like and trust brands.

So the supermarket got you in through their doors, because they lured you with the notion that everything they sell is at "cheap" prices (every little helps, bum slapping, we just reduced 2000 prices, reason 97 to shop with us is – Asda, Sainsbury’s and Morrisons, they are all at it). Yet Tesco’s price for the branded beans is no cheaper than anyone else’s. Look at the online price checker. All the main supermarkets sell the branded goods for exactly the same price.

But the larger the supermarket chain, the greater the buying power. The cost of buying in goods is less, even if the retail price is the same. This means that they will make more profit for every purchase you make.

I am all for free market economics but the problem is that geography, demographics and other factors mean that theory does not translate into practice. Textbooks tell us that "perfect competition" (the phrase that describes the situation where profits are minimised to a certain level and trading conditions are fair with perfect knowledge of the competitive landscape), is virtually impossible to reach. That means that central government has a role to play in making the free market work effectively. If they negate their responsibilities, then uneven competition can lead to "collusion" (where companies work together), "oligopoly" (where a couple of large players carve up the market), "cartels" (where players collude on pricing) and ultimately "monopoly" (where one player becomes so dominating as to create "super" profits, or profits which are way above an acceptable level). This is what we are seeing in the UK today and we, the consumers, are beginning to pay the price.

It also begins to explain why Tesco’s profits are so much bigger than those of the competition. The more they sell, the more buying power they have. The more buying power they have, the cheaper their stock.

Now I don’t know whether the beans, for example, are a loss leader (sold at a price below cost to bring you in to the supermarket) or whether the branded product manufacturers are taking us for a ride by charging us over the odds. But either way, Tesco is making more money, reducing the choice we get because the competition is failing and barriers to entry are increasing. This is because they are using their size to negotiate and squeeze suppliers. To balance things out, Tesco should pass the savings they are making on to the consumer.

It is also rather disturbing how much power they are wielding in the marketplace; the fact that pricing and marketing is becoming so manipulative and the way that in-store loyalty and credit cards are helping them monitor our behaviour. This information is allowing the biggest companies to calculate prices in an ever more scientific manner to maximise their profit and the amount we spend in their shops while squeezing the competition which will ultimately reduce our choice.

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