Line a 13 x 9 x 2-inch baking pan with waxed paper. In a large bowl knead marzipan with fingers, to soften. Stir in milk until well combined.
Add gelatin mix and food coloring, stirring until blended. Add coconut, breaking up large clumps with fingers. Stir in confectioners sugar a little at a time, using fingers, if necessary, when the mixture becomes stiff.
Place sugar crystals in a small shallow bowl. Pinch off heaping teaspoons of dough and roll into 3/4-inch balls. Roll in sugar and place on prepared pan. Refrigerate, lightly covered, 8 hours or overnight. Store in airtight container with waxed paper between layers, at cool temperature, for 2 weeks. Makes 5 dozen.