Simmering Sauce Rivalry Puts Spice in Texas Courts

A long-simmering rivalry between the two giants of the picante sauce industry--Pace Foods Inc. and Pet Inc.--has erupted in a spicy legal battle in Texas.

But the leader of the salsa market in California--La Victoria Foods--doesn’t seem to mind.

“That’s swell for us,” commented Don Potter, a food marketing consultant who handles advertising for La Victoria. “They’re fighting on two fronts. They’re fighting each other when they should be fighting the battle for the customers.”

San Antonio-based Pace, which manufactures the best-selling picante sauce in the nation, claims that Pet’s Old El Paso picante sauce uses a bottle design and labeling so similar to Pace’s own that it represents a blatant attempt to gain customers through confusion. The Old El Paso brand is the second-best-selling sauce.

“Imitation is not necessarily the sincerest form of flattery,” said Kit Goldsbury, president of Pace.

Officials at Pet deny Pace’s charges and insist that Pace is trying to drive it out of the hot sauce business. “Pet is simply allowing the consumers a choice between picante sauces. We don’t think there’s any confusion at all,” Pet attorney Gale Peterson said.

Picante sauce, like other salsas, is a fiery conglomeration of peppers, onions, tomatoes, vinegar and other ingredients that is used to douse tortilla chips and other Mexican foods. An estimated $200 million worth of picante sauce is sold annually, most of it in the Southwest.

Pace, with about 26.5% of the total picante market, holds a slim lead over Old El Paso, which has about 25.5%, according to estimates from both companies. Figures on La Victoria’s share of the national market were not available.

The Mexican hot sauce market in California is far different. La Victoria “is as at home in California as we are in Texas,” said Gary Lane, a marketing official at Pace. He noted that California is by far the largest salsa market in the country.

La Victoria has as much as 40% of the hot sauce market in Southern California, estimated Potter, president of Potter & Mack, a Toluca Lake advertising and marketing firm. Next are the Las Palmas, Ortega and Pace brands. Old El Paso follows those three in Southern California, he said. Rosarita, the industry leader in refried beans, has also just introduced salsa, he said.

A privately held company, La Victoria has headquarters and distribution facilities in City of Industry and a manufacturing plant in Rosemead. The market for salsas is growing, Potter said. “Not only are people getting more sophisticated in Mexican cuisine, but people are using it in other cooking as well.”

Meanwhile in Texas, the picante battle continues.

U.S. Magistrate Jamie Boyd of San Antonio recently agreed with Pet and denied an injunction sought by Pace to stop Pet from using the disputed bottle shape.

Pace also complains that Pet’s new label is too similar to Pace’s. Pace advertising uses the slogan “Pick Up the Pace,” while Pet has adopted “Pick of the Picantes.”

Pet insists the slogans are “visually and aurally distinct.” As for the unusual bottle shape with a recessed middle, well, it’s easier to grip, says Pet. The label? It’s pretty, nothing more, Pet maintains in its court papers.

But what really angers Pace is what it sees as Pet’s indulgence in corporate intrigue.

The San Antonio manufacturer says Pet launched its new marketing strategy as part of a secret plan called “Project Pace-Like.” Worse, Goldsbury claims, Pet employees have tried to glean information from Pace workers and have even been known to nose around in Pace’s garbage.

“A company that big shouldn’t have to do that kind of stuff,” an indignant Goldsbury said.

Pet, meanwhile, says it simply tried to imitate Pace’s success, not its product. Extensive market research conducted by Pet to improve its second-best position revealed that advertising by Pace conjured up romantic Southwestern imagery in customers’ minds.

A taste of Pace’s picante sauce made customers think of a “very sexy, colorful macho man” looking like “Ricardo Montalban, Matt Houston or Zorro,” who tooled around in a “red Ferrari, Corvette or a Chevy pickup truck,” Pet said in court papers.

Obviously, if Pace’s picante sauce could produce such visions, Pet would be foolish not to try to do the same. But lawyers for Pet scornfully told the court in recent documents that “Pace appears to have lost the image of Ricardo Montalban driving a Chevy pickup, drinking tequila.”

In its lawsuit, Pace wants complete surrender, asking that Pet be ordered to destroy its packaging and change its marketing approach. It also wants all profits Pet has made since introducing the new Old El Paso last October.