The original guy made it pink because he disovered folks would buy something that was “new and different,” something most advertising agencies still rely upon today. New! Improved!
Commercial pink lemonade is dyed pink with food coloring, but you can make it at home by adding a bit of grenadine or some strawberry or raspberry juice.
And the “bugs” are Cochineal bugs, a scale insect in the suborder Sternorrhyncha, from which the crimson-colored dye, carmine, is derived, and it is native to tropical north and South America. If you see prickley pear cactus pads with clumps of white fluff on them, that is the cochineal insect. The Spanish explorers and treasure-seekers prized the bugs because they could get huge bucks for shipping them to Europe to make red dye.
Also known as “cochineal extract”, “carmine”, “crimson lake”, “natural red 4”, “C.I. 75470”, “E120”, or even “natural colouring”, bug-based dyes are not toxic or carcinogenic. However a very few folks are allergic to it, suffering asthma, atrial fibrillation, or anaphylactic shock if exposed.
And yes, it might be used in pink lemonade. According to Wikipedia,
“The water-soluble form is used in alcoholic drinks with calcium carmine; the insoluble form is used in a wide variety of products. Together with ammonium carmine they can be found in meat, sausages, processed poultry products (meat products cannot be coloured in the United States unless they are labeled as such), surimi, marinades, alcoholic drinks, bakery products and toppings, cookies, desserts, icings, pie fillings, jams, preserves, gelatin desserts, juice beverages, varieties of cheddar cheese and other dairy products, sauces, and sweets. The average human consumes one to two drops of carminic acid each year with food.”
In other words, if you want to avoid consuming it, never eat red food except for tomatoes from your own garden.