Caramel Caramel Liquid or caramel colouring is a water-soluble food colouring. It is prepared by controlled heat treatment of food-grade carbohydrates, with or without chemical compounds, in a process called caramelization. Caramel Liquid is Yellowish Brown to Blackish Caramel Liquid produced by heating food grade carbohydrates like Corn Syrup or Sugar in a controlled environment in the presence of alkalis.