I've been fearful of this situation ever since my son was diagnosed 18 months ago... he's older though and fortunately never done this... I think that Monica's thoughts are exactly right: what regime is your grandson on? Does he (or his parents) count carbs?
If they are carb counting and he's on several injections a day, then they can try to build his favourite foods into his meals and snacks, or even as one-offs, as long as he injects.
Better yet, see if he can get onto a pump! My son is on one, and while he now doesn't eat everything he wants because he knows it's hard to control his bloods generally with fast sugar, he does do things like have milkshakes or sweets if he really craves them -- and gives little tiny doses of insulin to cover (or huge doses in the case of milkshakes, ahem!).
Otherwise I guess if it were me I'd make sure the lad is receiving treats in other ways -- that he is feeling special. It's so easy for controlling diabetes to be about denial of 'good things'. Maybe there is some way he can have other kinds of 'good things' instead, and crucially, things other people -- even his siblings if he has any -- don't have. Food fills a hole in lots of ways of course. Maybe a few substitutes will help take the pressure off?
Keep in touch with this forum. People will be along to help, and I really hope things can begin to turn around. It must be tough for you being so far away.
Best.