The products used to maintain coats are no different. The are chemicals and some are spray on. Food dyes are edible. If they can go into the gi tract, I'd hope they could touch the skin!
While I can definitely see why this wouldn't be appealing to everyone, I think there are many more things that people could be doing that are much worse. If it causes irritation, the owner will know not to do it again - just like if another hair product causes a reaction. CC has products like Black on Black (or whatever it's called) that help with coloring. No different and handlers use this kind of thing... Ellie would prefer that I don't make her spend extra time in the bathtub to use her totally unnecessary conditioner, but it makes her soft and I like it. She can get over it.
I also paint her nails and dog friendly nail polish and she is fine.