PACE, KRAFT IN CO-BRAND PACT

CAMDEN, N.J. -- A five-year-old cross-marketing relationship between salsa maker Pace Foods and Kraft Foods' Velveeta has expanded into a full-blown co-branding activity five months after Pace's acquisition by Campbell Soup Co.

shelves this fall.

"This product will end up on the Mexican food aisles, which is where we have our strength," said Rod Sands, president of Pace Foods, which is wholly owned by Campbell.

While the new item will be handled by the Campbell/Pace sales system, "both partners [share] in the risks and rewards of the venture," said Roger Deromedi, executive vice president and general manager of the Kraft Cheese Division.

The relationship between Pace and Velveeta predates Campbell's acquisition of the Mexican food company. It was rooted in a Superbowl cross-promotion with Velveeta five years ago, which included publication of a Pace/Velveeta queso dip recipe, said Sands.

"It worked out so well, both our marketing people saw opportunities. It kept expanding," he said.

The queso dip became the most requested recipe of many offered by the two companies, and it was printed frequently on packages of both brands, over several years.

In a promotion last January, the two companies collaborated on a limited-run Pace Velveeta salsa kit. It contained an eight-ounce mild Pace Picante sauce and a one-pound loaf of Velveeta boxed together with the popular recipe. That item was sold by Kraft's sales force, said Sands.

With the new blended product, Kraft gains added grocery aisle placement for the Velveeta brand, said Melitta Budler, Kraft Foods spokeswoman. A business team made up of brand executives from both companies will make joint marketing decisions for the product line and the companies will share costs and profits on an equal basis.