Multiple competitors just results in them all agreeing to raise prices when taxes are lowered.

Price signalling happens in situations with low competition, in a healthy, competitive market, if you raises prices someone will undercut you to take your business.

Out of curiosity, how do you propose increasing the number of competitors? Or is this a situation of “gee, that would be nice. Oh well, I guess nothing can be done.”?

You literally just break up grocery store companies and stop them from merging in the future. The solution is not complicated.