Line a large sheet pan with parchment paper. Divide fondant into as many pieces as colors that you would like to have. Knead food coloring, 1 drop at a time, into fondant. Sprinkle work surface and rolling pin with powdered sugar. Flatten fondant into a square and roll it out until it is 1/4-inch thick, rotating it so that it does not stick. Pierce any bubbles with a fork. Brush off excess sugar with a pastry brush.

With a knife, cut fondant into pieces just large enough to wrap each marshmallow. Stick each marshmallow on the end of each popsicle stick. Roll fondant around each marshmallow, pressing lightly to seal.