Just the threat that a big company has the capacity to lower prices drastically can keep small companies from entering a market.

In some cases, yes, but take a look at your local supermarket and see how many new brands not owned by the large ones popped up in the past few years.

You can also look at how much the large ones are buying local new brands (such as Blue Bottle). Tastes change, and small local companies are a great way for the big ones to figure out which new products work.

Not really, given that there can be high barriers to entry in getting on store shelves in the first place.

Not really, I've seen many grocery stores have sections dedicated specifically to local stuff because of the whole 'local' movement.