Staples Are Immigrant’s Bread and Butter : Two Flags Wholesale in Anaheim thrives by supplying materials to the many Latino and Asian mom-and-pop groceries dotting Orange and Los Angeles counties.

Ever since he could remember, Lucio Cabrera Sr. wanted to be a grocer.

At 14, he set up a small wooden shack along a dusty road of his impoverished village in central Cuba to sell fresh fruit, food, candies and tobacco. Three years later, his brother-in-law hired him to run his souvenir shop fronting a nearby beach resort.

This experience in retailing served Cabrera well when he immigrated to the United States and started Two Flags Wholesale, his own grocery warehouse business, in Anaheim seven years ago. He has supplied basic staples--canned milk, orange and coconut juice, paper towels, tissue paper and so on--to the multitude of Latino mom-and-pop groceries dotting Orange and Los Angeles counties.

As the Latino population of Southern California grew, so did Cabrera’s business, which grossed $3.4 million last year. Last month, Hispanic Business magazine ranked Two Flags among its top 500 Latino-owned companies in the nation.

“I like to think of myself as a grocer’s grocer,” said Cabrera, 55, as he surveyed the stock of fresh pinto beans and canned jalapeno chilies that sit next to boxes of canned Campbell and Prego soups and cases of soda in his 7,000-square-foot warehouse.

Being a grocery wholesaler has not been without difficulties. Sluggish sales and steep competition among wholesalers have led to price cutting, a common practice during a recession that slices an already-small profit margin. Such cuts mean that many wholesalers just break even or operate in the red.

The Mexican American Grocers Assn. in Los Angeles estimates that there are about 1,000 small Latino-owned groceries operating at least 1,000-square-foot stores in Southern California, each grossing $50,000 to $100,000 a week. But that’s a conservative estimate, said Joe Sanchez, founder of the 16-year-old trade group, who said the full figure could be up to 20% higher.

Cabrera--who runs Two Flags with his son, Lucio Jr., 25--tries to stay ahead of the competition by monitoring economic developments. When they go with their trucks to deliver the goods, they chat with customers about the neighborhood business and about what brands are becoming more or less popular.

They started cutting prices of some essential food items--such as eggs, milk and orange juice--by up to 15% months before the recession hit last summer.

“The cuts make our customers more competitive, and this strengthens our ties with them,” the younger Cabrera said.

Having a reputation as fair businessmen has rewards, the Cabreras discovered. Some Latino competitors--such as the Grocery Depot Inc., which operates a branch in Santa Ana--buy some merchandise from Two Flags.

“It’s a friendly competition,” said Hector Lozano, controller at Grocery Depot’s headquarters in the City of Industry. “Sometimes, Two Flags may be able to buy some products cheaper and we can’t, so we’d buy from them.”

In recent years, the senior Cabrera realized that there were pockets of opportunities for his business to grow within various Asian communities, so he started courting Asian grocers. It was tough because in most cases, the Asian grocers spoke limited English; being an immigrant and a high school dropout himself, Cabrera is not comfortable with the language, either.

Sign language helps, and the younger Cabrera, who is fluent in English, pitches in to talk shop with the Americanized offspring of Asian grocers.

But it was worth the effort, the Cabreras said. The Korean, Vietnamese and Chinese independent grocers now make up 40% of Two Flags’ business.

Two Flags is operating profitably because it is efficient--all goods are delivered within 24 hours--and it has a lean operation of just 13 employees. While most wholesalers deliver in 48 hours, the Cabreras guarantee same-day or next-day delivery.

“I know that if I became a food and grocery distributor, my sales growth will be limitless,” he said. “I can sell my goods to anyone, anywhere.”

Two Flags sells to more than 150 small groceries in Orange and Los Angeles counties, with the number of new customers increasing by about 15% annually.

Despite the recession, Two Flags continues to thrive. Sales in the first six months this year has already exceeded $2.4 million, and the Cabreras are predicting year-end revenue of about $5 million, which would be up 47% from 1990 sales.