Navigating uncertainty how CPG companies can respond to regulations

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Navigating uncertainty: How CPG companies can respond to regulations banning synthetic food dyes and turn it into a competitive advantage 

  • Navigating uncertainty how CPG companies can respond to regulations
2 minute read

In the U.S. food and beverage market, regulatory changes are becoming more common, and they profoundly impact industry practices from supplier and sourcing considerations to pricing, positioning and claims. 

The recent ban on Red No. 3, and discussions at the state and federal level to eliminate six additional synthetic food dyes presents both a challenge and an opportunity for consumer-packaged goods (CPG) companies. While the removal of these additives disrupts traditional product formulations and supply chains, forward-thinking companies have a chance to innovate, connect more deeply with their consumers, and redefine product quality. 

In addition to complying with a quickly changing regulatory landscape, innovative CPG companies will monitor consumer sentiment and ensure their products have positive perceptions and meet evolving consumer needs. 

Beyond meeting regulations, understanding consumer concerns  

In January 2025, the FDA revoked authorization for the use of FD&C Red No. 3 in food and ingested drugs. Most prominently used in candy, cakes, cookies, frozen desserts, and frostings, as well as some ingested drugs, the synthetic colorant has been linked to cancer in rats. While there is debate that studies in humans didn’t show the same link and the amount consumed is far less, the legislation stands with food and beverage manufacturers given until January 2027, and drug companies until January 2028 to reformulate their products. 

Equally important as regulatory compliance, synthetic food dyes have been raised in public awareness for their associations not just with cancer, but also ADHD and hyperactivity in children. 

In the first quarter of 2025, 20 states introduced nearly 40 bills to ban artificial food dyes and other additives. In West Virginia, lawmakers have already passed a ban on seven artificial food dyes, including Red No. 40 and Green No. 3. Companies will need to stop using them by 2028 if the bans are signed into law by the governor. 

This regulatory shift mirrors a broader consumer trend toward cleaner ingredients. It’s an opportunity for companies to reposition their products as innovative options that align with modern consumer values.

The news about the proposed legislation has heightened consumer awareness of the issue, making them more attentive to product ingredients, looking for safer and more natural options.

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Embrace innovation in product development with cross-functional collaboration 

Success can only be achieved through collaboration both internally and externally. Reformulating successful legacy products is more than just a supply chain challenge, it takes scenario planning and collaboration between Brand Management, Consumer Insights, R&D, Supply Planning, Manufacturing, Demand Planning and Sales in tightly bound integrated business planning solution to deliver a product with the right COGs to be priced competitively and meet consumer demand. 

A key to maintaining visual appeal, which is tightly linked with the perception of taste, lies in the development of new formulations using natural dyes. Ingredients like beet juice, turmeric, spirulina, and paprika extracts offer a vibrant palette while appealing to health-conscious consumers. 

Keep in mind that getting ahead of the curve will be important because every company will seek natural colors and locking in preferred suppliers early and maintaining good relationships will lead to a competitive advantage. 

Engage with current and new ingredient suppliers, proactively discuss your needs and create partnerships so the suppliers can evolve their portfolios to meet changing regulatory and consumer needs. Strengthening those relationships and locking in pricing for innovative new ingredients can ensure stability and avoid increased COGS and reduce the need a price increase for the consumer. 

Embrace advanced food science and biotechnology to create innovative, stable natural dyes without compromising product quality. Technologies such as microencapsulation can improve the stability of natural colorants, ensuring products retain their appeal over time. This partnership can drive research and development of scalable solutions.

Partner with marketing to rethink the brand story and marketing strategy

It can be very tricky to reformulate legacy products with a loyal consumer base. There are ingrained expectations for appearance and the level of perceived flavor strength or spiciness is tightly tied to the visual appearance. 

Ensure a strong partnership with marketing to conduct robust consumer acceptance testing to mitigate the risk of declining volumes. 

While natural colorants came with increased costs in the past, close partnerships and collaborative workflows with ingredient suppliers can keep costs in check. Strategic bulk buying and long-term contracts can help stabilize prices and maintain profit margins.

Engage in transparent communication and build trust with retailers and consumers. By moving early, you can not only secure the supply but position the brand at the forefront of innovation.  

By aligning product reformulation with the broader cultural movement toward clean eating, brands can set the stage for long-term customer loyalty and enhance their competitive edge. 

Foster a culture of continuous improvement and agile response

The ban on synthetic food dyes is more than a regulatory hurdle—it is an invitation for CPG companies to reinvent their brands and meet shifting market dynamics. By investing in research and development, realigning marketing narratives, and transforming supply chains, companies can turn this challenge into a strategic advantage. Embracing this change with thoughtful planning and agile strategies will not only ensure regulatory compliance but also pave the way for long-term brand success and consumer trust in an evolving marketplace.