Here's why:
* Possessive nouns show ownership or belonging. They are usually formed by adding an apostrophe and "s" ('s) to a noun.
* In this case, "blanket" is the object being possessed, and we're talking about its "color".
The phrase "color of blanket" doesn't directly express possession using an apostrophe, but it implies it. We understand that "color" belongs to or is a quality of the "blanket".