Red spice is one of the four spices dropped by Hellrats in Evil Dave's basement. If red spice is used in a stew, it becomes a Spicy stew, which can temporarily raise or drain the stats of Attack, Strength, Defence, Ranged and Magic. The amount it can raise these stats depends on how many doses used in the stew (between 1 and 3). Each dose of spice can cause the boost to either increase or decrease a stat by -2 to +2. Once all 4 doses are used, it becomes an Empty spice shaker, which cannot be used for anything. Red spices are essentially useless, since potions can be used to give better bonuses with consistency.
It is suggested that you use a Wily cat to catch the Hellrats because they offer a better chance to kill the rats than any other feline.