With their bold, block-letter logos and monumental store fronts, they are the new, unshakable linchpins of the British economy - the post-industrial equivalent of the shipyards of the Clyde or the cotton mills of Lancashire. But instead of making steam ships, cloth or steel, the Big Three supermarkets (Tesco, Asda and Morrisons, with Sainsbury's and Safeway now lagging behind) have made their fortunes by changing the way we shop, eat, live and even think. This they have done with chilling business acumen.

When Tesco announces its results, the question is not so much whether the company has survived as to what unprecedented heights its profits have soared this time. In half-year figures last September, they were £628 million - and expected to reach £1.65 billion annually - maintaining Tesco's position as Britain's most successful retailer. (By comparison, the 'struggling' Sainsbury's and Safeway showed profits of a mere £571m and £355m last year.) These days, £1 in every £8 we spend goes to Tesco. The company sells more DVDs than HMV, more shampoo than Boots, and its £4 jeans outsell Levis, Wrangler and Gap put together. Last month, eight pairs were sold every minute.

These are the figures Tesco wants us to remember, but there are other, less palatable statistics. For every £1 spent on bananas at Tesco, for instance, only 1p goes back to the plantation growers in developing countries - far less than they need to feed their families. An estimated 40p goes to Tesco. Indeed, the company makes a profit of £1m per week purely from the sale of bananas - enough to employ 30,000 plantation workers full-time and pay them a proper wage.

In 2003, Tesco's chief executive, Sir Terry Leahy, received a pay package of £2,838,000 - some 255 times higher than the average income of the British farmer (about £11,000) on whom the supermarkets rely. It is estimated that, every time a supermarket is built, 276 jobs are lost. Between 1976 and 1989 (the dark days of unbridled supermarket expansion), 44,000 food shops and grocers went bust; when a large supermarket opens, according to ethical watchdog Corporate Watch, it results in the closure of every village shop within seven miles.

Then there is the issue of air miles and aviation fuel. The lobbying group Sustain estimates that the average Sunday lunch (including chicken from Thailand, beans from Zambia and carrots from Spain) travels 26,234 miles to the table. Indeed, the globalisation of food production - buying it from the cheapest source rather than the closest - has been taken to ridiculous extremes. In a typical year, 126m litres of milk are imported into Britain while 270m are exported.

Where is the logic in that? Because of the way we shop, the average household spends £470 a year on packaging - one-sixth of its total food budget. When the National Farmers Union analysed the contents of a typical Tesco or Asda shopping basket, it found that only 26 per cent of the cost is accounted for by food; the rest is packaging, processing, transport, store overheads, advertising and the mark-up imposed by the supermarkets, which is sometimes as high as 45 per cent. Of the £4.78 we pay for 1kg of pork, just 95p goes back to the farmer; of the 36p spent on a pint of milk, 9p reaches his pocket.

As we browse, virtually brain dead, among the Styrofoam trays of doughy chicken mince and outlandishly large turkey thighs, most of us are vaguely aware of these troubling side effects of supermarket big business. Effortlessly, we overlook them. We might buy Fairtrade coffee when we remember and pick up organic pork chops from the farmers' market - but there we are again on a Friday after work, doing the Tesco run. As a result, 88 per cent of food sales in Britain occur in supermarkets while only 0.12 per cent happens at farmers' markets. And yet, in a Friends of the Earth survey in 2002, it was revealed that, on average, 1kg Cox apples cost 28p more at Tesco than on a market stall and 23p more than at a high-street greengrocer's. Why do we continue to shop this way?

The reason, we argue, is convenience. Under one roof, we can buy everything from lightbulbs to lollo rosso from early morning to late evening: with 100,000 lines in a typical store, we can have whatever we like, when we like. If our aim is to save money, we can buy economy lines; if we want to splash out, we can buy Tesco Finest; or we can do both at the same time. On Tesco.com, I came across a special offer that summed up both the genius of the supermarkets and the confused mindset of the middle-class consumer. 'Tesco Finest Fresh Spatchcock Poussin', it read. 'Buy two for £4, save £1.18.' On today's consumer superhighway, you can care about quality, the provenance of ingredients and the kudos of Continental cuisine and still get abargain at the checkout.

In fact, the paradox of a premium product sold cheaply helps explain the seductive appeal of supermarkets. 'It is no longer to do with price alone,' says Dr Hugh Phillips, a retail psychologist at Bournemouth University who studies shopping behaviour. 'After four decades of sustained prosperity, 80 per cent of us have most of the things we want. We can afford to live well.' The basic equation now, he explains, is value equals quality times price. In other words, people care more than ever about quality - but if they can get the same quality at a better price, they will. 'It's part of the old Protestant ethic,' Dr Phillips maintains, 'the Calvinist myth that value equals price - but shoppers are beginning to move against that.'

With price no longer the overriding factor, the big retailers have found themselves at an impasse. The old 'stack it high, sell it low' strategy of the Sixties simply won't wash - and price promotions ('2p cheaper than Asda') and loss leaders (staples such as bread and milk being sold below cost price to lure punters in) have lost their edge. The only supermarket promoting itself purely on low price recently has been Sainsbury's - an indication of its trailing market position. More successful rivals, already known for their budget strategies ('Every day low prices') after many savage price wars, are now emphasising quality and what they call The Shopping Experience. 'The big thing right now is creating the shoppable shop,' says Phillips, 'and a lot of work has been done on understanding the psychology of how people choose things, then laying the store out accordingly. It's all about convenience.' In other words, knowing our way around a store and getting in and out in record time endear us to a partic ular retailer far more than price cuts - and nothing is more likely to make us switch loyalty than changing the store's layout.

In my local Tesco, I am wandering the aisles in a state of low-key despair. It says on my shopping list 'two tins green olives', and I know they will be somewhere near the pasta and the olive oil. How do I know? Without realising it, I am drawing on the same reservoir of learned knowledge used by our ancestors to find a stream for drinking water. 'We all have these cognitive maps,' Dr Phillips explains, 'with certain fixed points, which used to be the hills, the river, the trees.'

Now, they are the bakery counter, the deli, the poultry chiller - and we know the location of certain things against those fixed points. 'Your cognitive map is part of your personal property,' says Phillips. 'If a supermarket starts changing that cognitive map, if they put something where people don't expect it to be, it makes shoppers absolutely furious.'

Scanning the shelves in the Mediterranean food aisle, there is no evidence of tinned olives. I circumnavigate the block, shoving carelessly parked trolleys out of the way with my foot, increasingly desperate to find OLIVES! This is definitely where they were last time. I ask a member of staff. Tinned olives are now next to the Branston pickle. How could anyone know that? 'Changing the layout is the biggest complaint among shoppers,' Phillips confirms. 'If you mess around with it, people say, "Hang on; you're making me give up something." Next time, they shop at Asda.'

But why is supermarket shopping so stressful? Part of the reason is that while we may be cash-rich, we're woefully time-poor - and the big retailers are finally recognising this. 'That's why there has been so much emphasis on non-food lines,' says Siemen Scamell-Katz, chairman of ID Magasin, a research and design consultancy working with the supermarkets. 'About 50 per cent of the average Tesco store is now given over to items like CDs, clothes and homeware - so the consumer doesn't have to go off to other places to buy them.'

Another innovation, Scamell-Katz reveals, has been piloted at Sainsbury's Hazel Grove store in Manchester; it is known as multiple formatting. 'What they have done is put a small store at the front of the main supermarket. It's recognising that people are just coming in to buy a few bits and pieces so they don't want to wander around the whole 100,000 square feet. It has its own check-out. Today, it's all about time-efficiency.'

In these work-obsessed times, even a short drive to Asda - the entire rationale behind the explosion of out-of-town superstores in the Seventies and Eighties - is considered too much of a chore by today's speed shoppers (the average shopping time these days is 15 minutes). Consequently, the supermarkets are moving back into the town centre. And they are getting smaller: 1,000 to 2,000 square feet for a small Sainsbury's Local or Tesco Express, compared with 50,000 to 60,000 square feet for a typical Tesco or Asda. 'The supermarkets are saying, "If you haven't the time to drive to my Sainsbury's or Tesco, then I'll bring it to your corner shop",' says Scamell-Katz. 'That's why Tesco has bought 600 convenience stores, to be rebranded as Tesco Express.' Perversely, the supermarkets are peddling us a Shopping Experience exactly like the one we used to know before they began their brazen stomp across the land, raising commercial property prices and destroying local communities.

Before 1950, when the first Sainsbury's self-service store opened in Croydon, shoppers used the parade of 'convenience stores' known as the high street. They went there on foot; they talked to the shopkeepers, who knew all about their produce; they were in and out in five minutes; and there was an abundance of fresh food at the butcher, baker, fishmonger and greengrocer, visible on shelves, not shrink-wrapped in plastic and hidden away in boxes. Now, the supermarkets have had a brilliant new idea: create a glitzy, ersatz version of the traditional high street or market. It's as if the entire, inexorable move towards out-of-town superstores of the past three decades has been a grim, pointless, social experiment. Can the high-tech retailers have got it all wrong?

Visit The Market at Bluebird, a joint venture between Sainsbury's and Sir Terence Conran on the oh-so-aspirational King's Road in London's Chelsea, and it appears they have. With its artisan bread-makers, olive-oil stalls and pyramids of fresh fruit, it offers a personalised experience that is more akin to shopping at a food market in France or Italy. 'Meet the traiteur with gourmet food to take away,' gushes the Conran website. 'Chat with the master butcher or pick up advice from the cheesemonger.' It all sounds vaguely familiar. Bluebird heralds a clutch of Market-style Sainsbury's.

According to Diana Hunter, senior manager for marketing format development, its new-look stores will combine 'the abundance of fresh seasonal foods of a market with the gourmet offering of a food hall'. It is reminiscent of a strategy by Asda, in 2001, of hiring actors to work as 'greeters', replicating the friendly, knowledgeable service of the past.

In another volte-face, retailers have had to recognise that the Saturday-morning supermarket sweep - cramming a trolley full of items to keep a family going for two weeks - is also a thing of the past; it bears no relation to how modern consumers shop. 'We are becoming less planned in what we do,' Siemen Scamell-Katz explains, 'and few of us even bother to make a list. We tend to be more impulsive, partly because money isn't such an issue for us. Our mothers would have written a list and shopped for the whole week. We shop for the next two or three days. Driving to the superstore three times a week would be a pain.'

For many, this return to a manageable scale will come as a relief. Today's stores are so overwhelming, few of us can recall what we've bought, or why, when we reach the checkout, says Phillips.

He explains: 'The problem is sensory overload because a supermarket has 100,000 lines and we're trying to select from those. The point is, you can't do it. If you spent one-tenth of a second checking every line, you wouldn't get out in a week.'

Besides, we can hold only four or five pieces of information in our minds simultaneously - 'and working up to that maximum', Phillips says, 'we get very tired; it's like sitting an exam, so we try to avoid it. What we do is process it all subconsciously using schemata, little scripts of learnt behaviour, which is virtually effort-free. When a person goes into a store, they look almost comatose; we measure their eyeblink rate, which shows how much conscious attention they are using, and it drops right the way down - but they are still absorbing visual clues that identify products. If they want coffee, they browse the shelves with their subconscious, saying, "No interest, no interest - ah, could be interested". They might have seen a particular bottle with a red label, so they raise their consciousness and validate it - "No, it's Oxo granules" - then they carry on. That's what the experienced shopper is doing. About 80 per cent of women do it but only 20 per cent of men. Men try to do it consciously and they get tired, so they either come home with nothing or entirely the wrong thing.'

When I ask if this sensory overload is deliberate, to lower people's faculties and make them buy, Phillips seems affronted. 'What a load of rubbish!' he exclaims. 'This idea that you can make shoppers behave in certain ways is a myth because, if anybody knew how to do it, the big retail groups would be desperate for it.' Both he and I know it is not a myth. At the University of Leicester, for example, it has been shown that playing French or Italian classical music influences what cuisine people choose. The fruit displays in supermarkets are always lit more naturally, partly to put shoppers in a good mood. That way, we stay longer and buy more. Our mood would not be enhanced to the same degree by rows of tins, which is why store designers put the fresh produce near the entrance.

'The reason they do that,' says Scamell-Katz, 'is in the knowledge that the fresh produce part of the store is more enjoyable. It sets up a preconception that the environment you have walked into will be full of fresh produce.' Which of course it isn't; the same is true of the aroma of fresh-baked bread.

'Supermarkets do the baking early in the morning before the store opens,' Scamell-Katz observes, 'so if you smell fresh-baked bread at 5pm, it won't be coming from the ovens.' Even the familiar store layout, with staples such as milk and bread at the back, is a throwback to less evolved days when the shopper was crudely manipulated. 'The thinking was that, on the way to getting your bread, you would pick up impulse buys on the way,' says Scamell-Katz, 'but in fact, it doesn't happen that way.' In a conservative industry, though, the old store layout prevails.

Where their true acumen lies, according to Phillips, is in being 'two minutes ahead' of the consumer. Tesco jumped on the organic bandwagon almost before people knew what the word meant; whenever Delia or Jamie promotes an ingredient on TV, Sainsbury's is stocking it the next day. As soon as they sensed public disquiet about GM food, the supermarkets unanimously banned it.

And so, after decades of decimating rural economies, lowering prices, driving down farm production costs and arguably contributing towards a host of health scares (BSE, salmonella, listeria, E coli, antibiotic-resistant genes in cut-price poultry and meat),the multiple retailers have gone squeaky-clean - and the reason is obvious. Low price is no longer a selling point; location (which triggered a rash of new stores in the last millennium) doesn't count for much when we all have an Asda and a Somerfield nearby. 'The next big thing,' Phillips predicts, 'will be an uncontaminated, physically and ethically clean food chain which makes people say: "I feel good about buying this and so does my family. Not only will we not be poisoned or given cancer, but I will feel better about it because I've exercised my choice - even if I paid 2p more for it."'

Scarcely a month goes by without a supermarket being acclaimed for its animal-welfare standards, Fairtrade initiatives or sourcing of local produce. Last month, Marks & Spencer launched a new code of practice for the production of fresh produce, with emphasis on traceability and minimum use of pesticides. In November, Asda stores in Scotland reintroduced the Kerrs Pink potato grown only by local producers. The same month, an audit by the Race to the Top initiative (an independent attempt to set a benchmark for supermarkets) voted the Co-op the country's most ethical retailer. Mind you, all the supermarkets bar three (the Co-op, Safeway and Somerfield) declined to fill in the questionnaire!

Nowhere is the greening of the supermarkets more conspicuous than at Leckford, a 4,000-acre estate in Hampshire owned by Waitrose. On a bright December day I am taken on a Land Rover tour by Malcolm Crabtree, Leckford's MD. 'This is Leckford free-range poultry,' he says, pointing to 13 sheds lined up on a hillside. Solar panels and windmills provide heat and light, while openings in the houses (where the corn-fed chickens spend the night) are rotated to preserve the grass from erosion.

'We send 1,300 birds a week from each house to Waitrose,' Crabtree explains. 'They are sold as a line called Le poulet d'Or. Stocking densities conform to RSPCA standards and our mortality rate is very low - about 3 per cent.' The same sanitised feel extends to the apple orchards (supplying 18 per cent of the Coxes at Waitrose), the organic milk processing plant, the two dairy herds and the mushroom farm - supplying 22 tonnes of mushrooms per week to Waitrose, sold, like all the other produce, under the Leckford label.

It is a textbook small farm, ideal as a showcase; but it strikes me as something of a marketing asset, an idyllic place to bring journalists like me. Nevertheless, the ethos of Leckford permeates the rest of the Waitrose business. English apples (as opposed to cheap US imports) account for 65 per cent of sales; for pears, the figure is 80 per cent. On the livestock side, a scheme for pork producers ensures high welfare for the animals and a fair price for farmers. Last November, this and the Le poulet d'Or system won Waitrose the title 'Compassionate Supermarket of the Year' in an audit by the Compassion in World Farming Trust, which traditionally takes a dim view of supermarkets.

Last year, Waitrose also launched its Locally Produced range - products sourced from within 30 miles of the store where they are sold. However, a 2001 report by Sustain found that such initiatives in most supermarkets, although loudly publicised, amounted to tokenism: of 2,075 products surveyed, only 79 (or 4 per cent) could be described as local. 'Our figure is small as well,' concedes Angela Megson, Waitrose's director of buying. 'In a 25,000 square foot store, you'll have maybe 100 local lines out of a total of 18,000. Altogether, we have about 350 local lines from 140 suppliers. but since we have only about 1,500 suppliers, it's not a bad percentage.'

Is it tokenism, or just one small piece of evidence that the cut-price, cut-throat world of supermarkets is trying to appeal to a more ethical consumer? After all, appearing to be more principled is a way of increasing market share. Aware of this, many supermarkets - including Tesco - comply with the Ethical Trading Initiative, which protects the rights of workers supplying the UK market. Who pays for the cost of compliance? The small producer, not the retail giant. According to a letter leaked to The Grocer magazine in May last year, Tesco demands £69.50 per quarter from each of its suppliers. We may be on the brink of an enlightened age; but it is David, not Goliath, who is vanquished.

So which supermarket sells the best foods?

The test: We asked top chefs to taste hundreds of items, and give marks out of five. Here are the most highly-rated foods.

The judges: Michel Roux, Mark Hix, Fergus Henderson, Gordon Ramsay, John Torode, Angela Hartnett, Richard Corrigan, Henry Harris, Peter Gordon and Vineet Bhatia.

Best organic apples Tesco £1.99 for bag of six ****

Best ready-salted crisps Waitrose 150g, £1.35 ****

Best organic coffee M&S 227g, £1.99 ****

Best organic muesli Waitrose 1kg,£3.29 ****

Best butter Tesco Finest Brittany Butter, 250g, 99p *****

Best lemon sorbet Asda 500ml, £1.38 ****

Best sausages Waitrose organic pork, £8.29/kg. ****

Best Parma ham Asda Extra Special, 60g, £1.19 *****

Best olives M&S Kalamata and Green, 340g, £2.19. *****

Best apple juice M&S 1 litre, £1.79 *****

Best fresh mushroom soup Tesco Finest Wild Mushroom and Madeira, 600g, £1.99 ****

Best fresh tomato soup Tesco Finest, 600g, £1.99 *****

Best chicken tikka masala Waitrose 400g, £3.49 ****

Best potato dauphinoise Tesco Finest, 400g, £2.49 ****

Rib eye steaks Sainsbury's taste the difference, £12.49 kg ****

Best cooked chicken M&S 2 boneless breast fillets, 210g, £2.99.****

Best French dressing Waitrose 175ml, £1.19 *****

Best Thai green curry paste Co-op 340g, £1.19 **** and Sainsbury's 250g, £1.49 ****

Best chicken stock Tesco 300ml, £1.15 ****

Best lemonade M&S still 250ml, 50p *****

Best plain bagels Tesco pack of 5, 92p *****

Best US style ribs M&S 300g, £3.99 *****

Best fresh Margherita pizza M&S stonebake cheese and tomato 340g, £2.89 *****

Cheesecake Sainsbury's American red white and blueberry cheesecake, 567g, £3.99 ****

Chicken korma Sainsbury's 500g, £3.29 ****

Organic extra virgin olive oil Sainsbury's 500ml, £3.29 ***** and M&S 250g, £1.99 *****

Research by Alice Ritchie