• The Wall Street Journal, Friday, February 22, 2008 11:30 AM

Sales at surplus or "salvage" grocers--a little-noticed segment of the food industry--are rising at a time when U.S. consumers face the highest rate of food inflation since 1990. Surplus grocers sell "closeouts," which include products that manufacturers have discontinued, seasonal items that are outdated and goods that are near the date when manufacturers expect freshness to wane. Many also sell products that were damaged in transit but remain edible.

Food prices rose about 5% in the U.S. last year. The size of the surplus food-retail segment isn't known. Analysts don't track the sales because most of the companies are closely held.

Low Grocery Outlet, a store in a low-income area in Minneapolis, says sales jumped 30% last year. Grocery Outlet, a Berkeley, Calif., operator of 131 surplus stores in the western U.S., has seen "a lot of new faces" and a steady increase in same-store sales since last fall, says Melissa Porter, vice president of marketing. "People are feeling poorer right now," she says

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