The growing scrutiny of food additives could bring a tide of changes to Americans' favorite snacks in the coming years. 

During the final days of former President Biden's term, the Food and Drug Administration (FDA) announced the ban of Red Dye No. 3 by 2027. Now, Health and Human Services (HHS) Secretary Robert F. Kennedy Jr. wants "real and transformative" change by "getting the worst ingredients out” of food, according to a letter viewed by Yahoo Finance that summarized the HHS secretary's remarks to the Consumer Brands Association.

By the time he leaves office, RFK Jr. wants to remove artificial coloring from the food supply. His administration is just starting to take shape, as FDA commissioner Martin A. Makary started on April 1.  

The renewed focus comes as packaged food companies like General Mills (GIS), WK Kellogg (KLG), and Kraft Heinz (KHC) are facing multiple headwinds, including healthier eating trends, potential inflation driven by tariffs, and GLP-1s.

While General Mills tried to remove artificial colors and flavors from Trix cereal in 2015, the original formula returned in 2017 after consumers complained. However, times have changed, per Bernstein analyst Alexia Howard.

"We seem to have ... a better understanding amongst consumers about the links between diet and long-term chronic health conditions ... there's a lot more interest in longevity," Howard said. "The groundwork is set for this to actually have a meaningful impact more quickly and be more receptive amongst consumers to some degree." 

The sale of products with Red Dye No. 3, which is in products including candy, gum, mints, baking supplies, desserts, cookies, crackers, and salty snacks, increased 4.9% from 2020 to 2024, per NielsenIQ. In the past year, sales revenue fell 5%.

Following the ban, dollars spent on items with red dye declined sharply, with sales falling 14.27% year over year in the last week of March. 

Red Dye No. 3 is used in roughly 6,000 items in the US. It was banned for food use in the EU in 1994. 

The continuing movement to remove additives from food will result in reformulation costs for companies. Using natural alternatives are "generally more expensive than synthetics," per Mizuho analyst John Baumgartner. However, companies have yet to provide the exact cost differentiation. 

In the immediate term, the ban on Red Dye No. 3 should cause minimal disruption. 

"Companies have already had to reformulate these ingredients in Europe, and even after those reformulations, the businesses are plenty profitable," Baumgartner explained. "We don’t anticipate the shifts to have a material financial impact."

He said even with a large jump in ingredient costs, it would be "very manageable" since coloring is "a small percentage of the overall cost of goods." 

Kristoffer Inton of Morningstar said during the years of changeups, General Mills' research and development was "always consistently" around 1.3% to 1.4% of their sales. 

He said that if artificial flavors were fully banned, the costs would be passed onto consumers. 

A ban of Red Dye No. 40, which many companies have shifted toward, "will be more concerning for the industry," said Sherry Frey, NielsenIQ's vice president of total wellness. It's in roughly 30,000 items.

In August 2024, the California School Food Safety Act proposed to ban six food dyes from being served in public schools. West Virginia Governor Patrick Morrisey made a similar move in late March with a law that included limits on Red Dye No. 40.

"Companies themselves don't want a patchwork of legislation that's different across different states," Howard said. "This is going to be pretty dramatic and actually have a real impact on the ingredients ... at a national level."

About 85% of General Mills' portfolio is "free from certified colors," General Mills spokesperson Mollie Wulff said. The company will "evolve to meet both consumer demand and regulatory requirements.”

Baumgartner said 85% is likely "one of the better in the industry."

Fruity Cheerios, M&M's, Kraft Macaroni & Cheese, Powerade, Hawaiian Punch, and Kool-Aid all include additives. WK Kellogg does not use Red Dye No. 3 in its products, but its Froot Loops cereal uses Red 40, Yellow 5, Blue 1, and Yellow 6 dyes.

Product reformulations could be good news for ingredient makers like McCormick & Company (MKC).

"This reformulation super-cycle that's propagated by RFK Jr.'s Make America Wealthy Again agenda will really benefit the flavors business for McCormick," Howard said. 

McCormick CEO Brendan Foley told investors that the company's seeing a "tick-up in reformulation activity."

On the flip side, a 10% tariff on all countries (McCormick imports from 85) could increase its cost of goods inflation from low-single digits to "mid to high" single digits, though smaller players like private labels would be hit harder due to their lower margins, Howard added. 

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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on X at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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