Texans with a hot-selling hot sauce find competition hot, too

It was just after World War II that David Pace perfected his picante sauce by testing batch after batch on his golf buddies. Forty years later, San Antonio's Pace Foods is still making picante after the original recipe, and the spicy red sauce developed on the Alamo City's fairways is available in 50 states.

With sales of Pace picante sauce growing at about 20 percent a year, the jalapeno peppers grown in south Texas are not bountiful enough, nor are they available year-round, to keep the locally owned company in the 6 million pounds of the fresh green peppers it consumes each year. So Pace has developed a pepper supply trail that stretches from the border to the Yucat'an.

Sometime this year the seven-ingredient concoction from San Antonio became the best-selling Mexican food sauce nationwide, with 26 percent of the market. That put Pace at the top of a heap of taco sauces, salsas, and picante sauces.

But taking the lead has also pitted the 140-employee company against some stiff competition. Last month Pace filed suit against Pet Inc. of St. Louis for allegedly copying Pace's hourglass bottle and labels for its Old El Paso brand picante sauce, the former market leader. Pace alleges the packaging change confuses consumers who have become accustomed to reaching for the 16-ounce hourglass bottle for their favorite picante sauce. Pet claims in its response that consumers will not confuse the two products.

Pace officials say their very livelihood is in the balance, since picante sauce makes up 95 percent of their sales and 99 percent of their profit. But with Mexican food sales booming across the country, the stakes are high all around.

Total supermarket sales were up nearly 5 percent nationwide last year, but growth in Mexican food specialties were more than double that percentage increase, according to Nielsen Marketing Research of Chicago. ``Mexican food specialties are way ahead of the market in terms of overall growth,'' says Travis Whitlow, promotions manager with Nielsen, ``and sauces are the big growth item within that category.''

Reasons for the growth are partly demographic. ``We have a tremendous influx of people from Mexico and South America, and they're having an impact at the supermarket,'' says Karen Brown, vice-president for communications at the Food Marketing Institute in Washington, D.C.

Growth in the popularity of Mexican-food restaurants is also leading more Americans to try Mexican foods at home. In 1984, Mexican-food establishments accounted for 11.5 percent of restaurant sales, up from 2.8 percent in 1980. Mexican food is now second only to Italian in ethnic popularity in the United States.

Another reason is that Americans like their food - be it Mexican, Texan, or Thai - a little hotter these days. For Pace, that heat is supplied by jalapeno peppers.

For years the company depended on Mexican jalapenos sold by brokers at the border when supplies of their Texas cousins ran thin. But the company couldn't rely on the supply or quality of peppers offered by Mexican middlemen, says Lou Rasplicka, vice-president of operations and himself a jalapeno expert. So four years ago a group of jalapeno connoisseurs took matters in their own hands and headed south.

``We just drove along, on the lookout,'' Mr. Rasplicka says. ``We saw some growing at the end of a dusty road, found out whose they were, and we've been buying them there ever since.'' Pace has working relationships with Mexican farmers all the way to the Yucat'an Peninsula and is now building a refrigerated warehouse near the village of Paplanta, in the state of Veracruz.

``Our quality is based on everything being fresh,'' says Pace president Kit Goldsbury, ``so the closer we get to the crop, and to the people growing it, the better it is for us and our customers.''

The company now has a steady supply of the fresh hard peppers that give the sauce its heat. But that doesn't end the challenge of gauging how much heat a particular crop of peppers is going to supply.

``That's a big problem for us,'' says Rasplicka, who points out that soil, sun, rainfall, and other climatic conditions can affect a pepper's punch. Pace markets three varieties of picante sauce - mild, medium, and hot - whose heat levels are determined by the amount of jalapenos used. But the company would like to be able to measure a pepper's heat more accurately.

Pace is using a new, mild variety of jalapeno developed by Texas A&M University researchers in its mild sauce when the peppers are available. And it is also working on measuring the capsiacin - the chemical compound that makes peppers hot - in various pepper crops.

``We want to get to a uniform heat level in the sauce,'' says John Brogan, a research chemist in Pace's laboratory. ``We don't want to have to depend on Mother Nature to determine that for us.''

Aside from sauce contents, company officials are concerned that Pace's hourglass bottle has a lot to do with how regular customers identify the product. This accounts for the Pet lawsuit.

Rod Sands, Pace's vice-president for sales and marketing, notes that Old El Paso recently traded its cylindrical 12-ounce bottle with a yellow, red, and brown label for a larger bottle that resembles Pace's hourglass container and a new label similar to that of Pace.

The new packaging is being marketed only in Texas, Colorado, and Atlanta, according to Les Landes, director of communications at Pet.

``It's not uncommon to come up with different packaging for different markets,'' he says.

But those states are among the places where Pace sales are best, says Mr. Sands. He says Pace sells especially well west of the Mississippi, which is also where Mexican food sales are growing fastest.