Hi, C. --
My daughter has Red Dye #40 allergy, and every time I talk about this subject, I start getting mad. We only realized she had this allergy after she had a reaction to children's MEDICATION! Of all the ridiculous things to contain any thing extra -- especially a KNOWN allergen for children!! When my pediatrician identified that as the culprit, I was absolutely furious! We'd always purchased dye-free products for her but had gone to a different grocery store where they'd not been available and just picked up a different version of her usual medicine -- I think I was Children's Advil.
Anyway, it's utterly stupid that any colorants would be used in products for INFANTS, as if those babies care what color their meds are!!
So, we have learned to be very aware of the ingredients in things, and yes, we do have to read packaging. Red dye is everywhere... even in things like "fruit snacks" and things where you'd not think it would possibly be necessary. Obviously, punch and other stuff like that has red dye, and candies do, as well. Medications are one culprit people probably don't often think of.
My daughter is now 3, and she's very aware that she should not have these red products, so I don't worry too much. If someone offers her something that's on her no-red list, she'll ask for something of a different color - even if it's an M&M or sweet thing she'd like to have.
I don't know how dangerous the allergy is -- I'd suspect not very, and they may grown out of it -- but hives are no fun. I hope this has helped you. It would still be good to pursue this with your pediatrician, but I wouldn't feel too worried... just get in the habit of being a red-spotter, and you should be fine. Apparently, RED 40 is different than other variants of red colorant. There's another sister product of Yellow that I believe is also related. We mainly just worry about the red, and she's been fine.