M. Loeb Corp., a grocery wholesaler that supplies approximately 200 independent grocers in the Washington area, is shutting down most of its Washington area operations -- in part because of difficulties facing independents in this grocery-chain-dominated area.

The company is also selling its four Bag'N'Box limited selection discount stores. The stores were among the first in the area and helped bring discount grocery marketing to metropolitan Washington.

"Some of them are highly successful" said Frank Warnock, president of the Ottawa-based corporation. But since the "box stores" have been supplied by the closing wholesale operation, keeping them open "doesn't make any sense," he said.

The wholesale operation has been losing money for several years, according to Warnock.

Loeb began notifying grocers on Tuesday that it plans to close its 167,500-square-foot warehouse in Landover and end deliveries to the independent stores. Warnock said the company will help its customers to find other suppliers and will cease operations in two to three weeks, depending on how long that takes.

Sam Steinberg, who runs the Clover Market on Connecticut Avenue NW near Nebraska Avenue, had not heard the news about his supplier until a reporter called. "We had heard rumors that they were being bought, but I talked to somebody at Loeb last week and they said no," he said.

Warnock said Loeb's local people were not notified until this week.

Steinberg later called Loeb's local offices and was told that deliveries would end Feb. 22. "They've really put us in a bind," he said. "They've sold off half their stock and they're not going to be getting any more in," said Steinberg, who has been getting supplies from Loeb for three years.

"Everybody is madly trying to find somebody," he said.

Although there are other wholesalers in the area who will pick up the business dropped by Loeb, Steinberg said some wholesalers impose minimum amounts of deliveries, narrowing the selection further for small groceries. "We have to get somebody who can buy in volume so we can sell at a reasonable cost" to survive in competition with the chains, he said.

It was the dominance of the grocery chains in this area and the fact that a relatively large number of wholesalers competed for the small piece of the market left to the independents that added to Loeb's losses in this area, said Warnock.

"I guess it's a tough business in Washington for independent stores -- probably the toughtest in North America that I've encountered," said Warnock. "There are three or four very good wholesalers in that area competing for a very small portion of the business," he said.

Figures on how much of the market Giant, Safeway and the A&P control in this area range from 53 percent to more than 60 percent.

Warnock said Loeb will continue a small wholesale Cash & Carry operation in Washington where restaurants and small grocery stores pick up supplies rather than have them delivered. Loeb will also continue to provide warehousing and delivery of groceries to the Department of Defense until an alternative source can be found.

Loeb will sublease the warehouse in Landover and has sold its inventory to P.A.&S. Small of York, Pa., he said. The discount stores will be sold to independents.

Loeb is a 58-year-old Canadian firm which has been active in the U.S. for about 10 years. The company operates 55 warehouses in the U.S., said Warnock.

The company, which has sales volume of about $1.5 billion plans to expand in both Canada and the U.S. in the next year in spite of the closing of its Washington operations, Warnock said.