By Jack Hough
I've developed a five-alarm FireBall habit. A colleague recently set out a never-ending jug of the spicy cinnamon hard candies. One a day immediately escalated to two, then five. I knew I had lost my way when I hit up Amazon for a home supply.
If that isn't a cautionary tale, then maybe it's at least a small-cap stock idea. Not a candy maker -- a colorant dealer. UBS recently initiated coverage of a company called Sensient Technologies, predicting 30% upside for stockholders even though the past decade's returns have disappointed. There is a sweeping movement afoot to replace artificial dyes with natural ones, and there's good money in that, not least because the natural stuff isn't as vibrant, so it takes eight to 10 times as much of it to do the job. Sensient is poised to cash in on that new volume.
It turns out that the sweet heat marbles that have stolen my free will contain something called FD&C Red No. 40, sometimes called Allura Red AC. This is apparently doing meaningful harm, or no harm at all -- opinions are divided on the matter. Like FD&C Yellow No. 5, it's made from petroleum, and as the initials suggest, it's approved in the U.S. for food, drugs, and cosmetics. In Europe, natural colorants have already taken over 80% of the market, whereas in the U.S., they're only 30% but rising.
This is a passionate topic for many, so let me disclose where I stand. My wife stocks the kitchen with raw almond butter, artisan orange peel marmalade, and flourless sprouted grain bread, so when I recently felt like making a PB&J, I ran out for Jif, Smucker's, and Wonder. In other words, I freely admit to being a bad person. Also, Health and Human Services Secretary Robert F. Kennedy Jr. has made phasing out Red No. 40 and Yellow No. 5 a central part of the Make America Healthy Again movement. Then again, his boss, President Donald J. Trump, has acted in support of another controversial food-chain chemical found in Roundup weed killer. Predicting the politics on these things is like Sudoku puzzles to me: I don't know the rules, and I'm probably not going to learn, mostly from disinterest.
But for years, I've heard some parents say that foods with artificial dyes make their kids hyperactive, and I believe them. In Europe, products with these dyes must carry warning labels to that effect. Fine: I'm more inclined toward caution in feeding kids than in what goes into my half-century-old PB&J hole. I've seen claims of even more-worrisome health effects, and about these I have no idea. A totally different colorant, Red No. 3, made from iodine, not petroleum, has been banned for some uses since 1990 due to studies linking very high doses to thyroid tumors in rats.
What matters most for our purposes is what shoppers want, and enough of them are demanding cleaner ingredients that companies are responding. PepsiCo, Nestlé, J.M. Smucker, Hershey, Kraft Heinz, General Mills, WK Kellogg -- these food giants and others have announced plans to phase out artificial colorants, mostly by the end of this year or next. Stores like Walmart and Target are cracking down, too. And California and West Virginia are banning artificial colors in school meals.
There are technical limitations here. Have you seen Canadian Froot Loops? They're colored with actual fruit, but their earthen hues evoke a bag of Terra chips -- the ones with parsnip, sweet potato, and what have you. It's unclear whether Americans would stand for such a culinary de-neonization. Manufacturers must find a mix of colors that won't hurt sales, fade, or introduce vegetable flavors in foods that are supposed to be fruity. The colorant dealers they turn to must have supply chains that can respond quickly.
Sensient, which is vertically integrated down to proprietary crop breeding, has an advantage. The company started as a whiskey and gin distiller more than 140 years ago, and during Prohibition leaned on selling its yeast. Today it sells mostly flavors and colors for food, cosmetics, and drugs. In 2000, it changed its name from Universal Foods.
In recent years, Sensient has been a 3% sales grower, on average, but UBS reckons it will shift to averaging 10% yearly growth over the next five years, mostly from the shift to natural colorants. The company, whose sales are pegged at $1.7 billion, up 8% from last year, has about $100 million in exposure to artificial-colorant sales, but it figures it can convert this to 10 times as much in natural-colorant sales. Shares go for 25 times this year's earnings forecast.
I'm not sure what will become of my beloved FireBalls, by the way. Sensient has a product called SupraRed that can produce impressively vivid shades. It's made with the company's proprietary UberBeet technology. I don't suppose that would count as a serving of vegetables, but it's good to know there are options.
There's another intense natural red called carmine that has been around for ages -- the British used it to color their uniforms during the American Revolution. That's my second-favorite side of that war, if I'm being honest, but I appreciate the historical connection. My only hesitation -- and I don't mean to be fussy -- is that carmine turns out to be made from something called cochineal insects, or dactylopius coccus, for you entomologists.
Apparently these tiny, scaly sap-suckers like to live on prickly pear cacti, which are grown for the purpose in Mexico, Peru, and Chile. Cochineals are collected by hand and then dried and crushed into powder so that their carminic acid can be extracted for dye. Sensient says that carmine could be the new Red 3 or Red 40. As the company's senior technical director explains in an article, "At one point, the insect source of cochineal was under some scrutiny, but lately, insects are an emerging food trend."
Good to know. I'm in the market for a 30-year supply of Red 40 FireBalls, if anyone knows a wholesaler.
Write to Jack Hough at jack.hough@barrons.com. Follow him on X and subscribe to his Barron's Streetwise podcast.
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
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April 03, 2026 12:51 ET (16:51 GMT)
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