Mexican Food Starting to Sell Like Hot . . . Sauce

Americans bought more Mexican salsa in 1994 than catsup. With giants Campbell Soup Co., Nestle SA, PepsiCo Inc.’s Frito-Lay and Pillsbury Co. poised to launch new Mexican brands, burritos, quesadillas and tortillas may soon be as American as apple pie.

Grand Metropolitan Plc’s Pillsbury Co. launched the first salvo in the fiery war over the $1.3-billion market for Mexican food. In the company’s new television spots, a chubby John Goodman-like man mambos across the screen to zany music in an ode to Old El Paso nachos.

Pillsbury chief executive Paul Walsh said he plans to pump at least $20 million into the ad campaign in 1996 to jump-start the brand, which has lagged the competition.

“Our aim was to put some fun in the brand and update Old El Paso’s image,” Walsh said.

Mexican food is the fastest-growing food segment on U.S. supermarket shelves. Americans spent $2.5 billion on it this year--including money spent in restaurants. Analysts expect the market to grow at least 8% a year, or double the growth of most other food categories, to $3.5 billion by the millennium.

Pillsbury is hardly the only cook seasoning the pot. In November 1994, Campbell Soup purchased Pace, a line of Mexican food, for $1.1 billion and plans to take the brand national.

Campbell formulated new products, co-branded Pace/Velveeta Salsa con Queso sauce with Kraft Foods, and has increased ad spending to $22 million. That’s when Ortega plans to begin a new advertising campaign. Glendale, California-based Nestle USA Inc. bought Ortega Mexican foods from RJR Nabisco Corp. this fall and fused it with its Contadina and Asian Favorites brands.

A more potent contender may be PepsiCo’s Frito-Lay Tostitos and Taco Bell meal kits. The company sells its salsa products in the snack aisle, a shrewd move that competitors have been slow to react to.

The home meal kits, now in 40% of markets across America, according to PepsiCo, piggyback the $170-million-a-year advertising of the fast food chain. Taco Bell was recently lauded for healthy low-fat Border Lights fast food.

As of October, Pillsbury led all companies with a 20.2% share of the Mexican food market, down a smidgen for the year but up slightly in the past 12 weeks. Pace had a 14.5% share, followed by PepsiCo’s combined brands, up sharply to 13.2%. Ortega sales fell to 5.1%.

More than 300 companies nationwide sell Mexican food, including Goya Foods Inc., the second-largest Latino-owned company in the country, ConAgra’s Rosarita foods and Hormel Corp.’s Chi-Chi brand.

Americans purchased $940 million in sauces this year and analysts expect retail sales will hit $1.6 billion in 1999.