Supply constraints and a potential hit to demand
In 2025, the Food and Drug Administration (FDA) launched a national initiative to phase out synthetic food dyes in the U.S., citing concerns over potential links to health conditions such as ADHD, obesity, and diabetes. Several major food manufacturers have since pledged to switch to natural alternatives over the next few years. However, Reuters reporting and government tracking indicates that progress has been slower than anticipated.
Our Consumer analyst, John Oh, discussed the issue with industry experts to understand the challenges companies face in moving quickly, which include: supply constraints, operational implications for U.S. food manufacturers, and potential effects on consumer demand.
Supply constraints
According to Third Bridge experts, regulation remains the biggest supply constraint as there is no single globally approved colour that works everywhere in the world. For example, safflower (derived from the lutein plant) which is typically used to produce yellow and orange shades, can be used in Europe but not in the United States.
Additionally, despite the size of the U.S. agriculture industry, many pigments used for food dyes are not grown domestically, and the supply of natural colorants in the U.S. would be insufficient to support a full transition, forcing food manufacturers to source pigments internationally. Our experts noted that this issue is further compounded by factors such as the length of time required to grow raw materials (approx. 9–12 months), geopolitical events, tariffs, and environmental factors, all of which further increase manufacturers’ risk exposure.
As food manufacturers seek new suppliers, our industry experts identified Sensient and Oterra as the dominant forces shaping the natural color landscape. According to experts, Sensient holds a strategic advantage through its dual-track portfolio, maintaining both synthetic and natural solutions. This flexibility allows them to seamlessly convert existing artificial colour customers to natural ones. Oterra focuses primarily on natural colours, though it has reinforced its position by acquiring companies with artificial offerings. Despite this, experts often favor Sensient’s diversified U.S. infrastructure and multi-sector reach as key drivers for long-term outperformance.
When considering overall market share, the picture remains fragmented, with smaller players able to compete with larger ones on specific pigments. For example, specialists like California Natural Colors continue to challenge the giants by dominating niche verticals such as red pigments derived from grape skins.
Source: Estimated based on the latest report published by Global Market Insights Inc. and Third Bridge expert interviews
Additional cost implications for U.S. food manufacturers
While currently there is no federal regulation mandating this change, the combination of state-level bans (such as the California Food Safety Act and West Virginia state law) and corporate health pledges is driving companies to meet a 2027 deadline. Industry experts we spoke to are increasingly skeptical as to whether large consumer packaged goods companies can successfully transition their entire portfolios by the deadline due to increased costs and bottlenecks in R&D.
The first hurdle food manufacturers are likely to face is additional cost. According to our experts, color-related expenditures could be set to increase 8–10 times the current company spend. This is due to two factors:
- Pigment concentration: Natural colorants often require three to ten times the weight of synthetic dyes and still may not achieve the same intensity.
- Dosage requirements: As a result, higher dosage rates to achieve the same vibrancy will be needed, creating a compounding cost effect along with the rising price per pound.
Switching to natural alternatives may introduce secondary operational risks, with our experts highlighting two key areas of concern which will require additional R&D investment:
- Thermal sensitivity: Categories that are highly processed and go through a high heat cycle during the manufacturing process will be most impacted, with natural pigments being more prone to browning or fading under thermal stress.
- Shelf-life and taste: Switching to natural alternatives can also result in a reduction in shelf-life and changes in product taste, introducing risks such as loss of appeal.
Unlike their U.S. counterparts, food manufacturers with a European footprint have a distinct head start in the use of natural colours. For over a decade, the EU has been moving away from the use of artificial colorants driven by a 2010 regulation that food and drink containing certain artificial colourings must carry a warning on the packaging: “may have an adverse effect on activity and attention in children”. To avoid carrying this warning, many manufacturers switched to natural colours. These companies have already navigated the learning curve of natural stabilization and supply chain security. For U.S.-only players, the next two years will be a period of rapid catching up to build the necessary operational know-how.
Implications for demand and consumer loyalty
Historically, the transition to natural dyes has been a delicate balancing act between health and visual appeal. Our experts cited the 2017 reformulations of Trix and Froot Loops as examples, noting that when General Mills and Kellogg’s shifted to muted, natural hues, consumer backlash was swift. For many, the duller colors signaled a blander product, even though taste remained largely unchanged. Switching to natural food dyes could result in color changes and, therefore, perceived taste, which experts suggest some customers may not adapt to, potentially affecting demand.
Despite these historical hurdles, conversations with our experts suggest that consumers today are more likely to accept changes to product color for the value proposition of a cleaner, better-for-you label due to shifts in sentiment and the consumers of 2026 having fundamentally different priorities than the consumers of 2017
Indulgent categories, such as confectionery and brightly colored snacks, are expected to remain the most insulated from the clean-label trend. Products such as snacks and candies that are brightly coloured, may still experience an outsized impact on demand. As our experts put it: “It’s an indulgent treat—it’s not supposed to be healthy.” In these fun-first segments, manufacturers must decide whether to absorb the elevated cost of high-performance natural pigments to maintain vibrancy or risk losing a core demographic that prioritizes visual impact over ingredient transparency.
Our experts suggest that the most significant threat to demand may not be the color or taste of the food, but the price tag. As manufacturers pass the increase in color costs down to the consumer, the resulting price hike may test the limits of customer loyalty, particularly in a market already sensitive to grocery inflation.
Conclusion
For U.S. food manufacturers, this transition is not merely a compliance deadline, but a test of brand resilience. To overcome additional costs and navigate the implications for demand and customer loyalty, success will require supply chain diversification, leveraging operational know-how and managing consumer expectations. The neon hues of the past may be fading, but for the manufacturers who navigate this change strategically, the future of food color could be both healthier and more sustainable.
All insights in this article are based on information shared by Third Bridge experts.
For media enquiries, please contact us at comms@thirdbridge.com.
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