I am a big fan of coconut and try to use it in recipes whenever I can. Coconut milk and coconut cream are great, but really I like the taste and texture of shredded coconut and that is generally the type of coconut that I – and probably most of you bakers our there – use most. The most commonly found in grocery stores in my area and in most of the US is sweetened shredded coconut, but unsweetened shredded coconut is also easily available and I often get asked which is better for baking for use in a certain recipe or if the two can be substituted for one another.The simple answer is that the two are pretty much identical in how they behave in recipes, mixing in easily and adding a nice, chewy texture. You can use these two types of coconut interchangeably in a recipe and get good results. That said, if a specific type is called for in a recipe, I would try to stick with it because the two coconuts taste a bit different and will give you a different result. If no specific type is called for, you can use what you have on hand or whichever type you prefer.
The sweetened coconut has sugar added to it before drying, so it tends to be a bit sweeter and more moist from the outset. The sugar actually helps to bring out the flavor of the coconut, but since most baked goods will have sugar in them anyway, this isn’t necessary to ensure a good finished result and unsweetened will still perform well. There is a small chance that sweetened might be slightly too sweet in a recipe that calls for unsweetened, but the sweetened coconut is not so sweet on its own that it should really throw off a recipe in that way.