As reported in TV Guide Tubby Tustard is Bird's Custard (Americans can use vanilla pudding or similar] and red food coloring. Even though the actors playing Teletubbies can't exactly "eat" with their masks on, Tubby Tustard was made to be edible, so that Mums and Dads could surprise their offspring with this exotic delicacy.
I swear I am not making this up.