Lyric discussion by DroppedD 

Cover art for Candyman lyrics by Grateful Dead

I think bbrockme's post is on the right track, except the lyrics were written by Hunter, not Garcia.

The "Candyman" is a somewhat common song theme among blues and folk musicians. Hunter wrote his own versions of many folk songs, two that come to mind are Betty and Dupree, Casey Jones and Stagger Lee. There are others...

The songs is not about drugs, but it's about a man the ladies like a lot.

[Edit: left out Casey Jones...]