In a large mixing bowl, whisk together the sweetened condensed milk, melted butter, and vanilla extract until fully combined.

Add the 5 cups of medium shredded coconut and confectioner's sugar to the bowl. Stir well until the mixture is evenly combined and slightly sticky.

Refrigerate the mixture for 15 minutes to firm up, making it easier to handle.

Divide the 2 cups of finely shredded coconut into separate bowls, depending on the number of colors you wish to use. Add 3-4 drops of liquid food coloring to each bowl and mix until the coconut is evenly colored.

Once the mixture has chilled, use a small cookie scoop or measuring spoon to portion out 1 ½ teaspoon-sized amounts. Roll them between your palms to form smooth balls.

Roll each ball in the colored coconut of your choice, ensuring they are fully coated.

Place the coated coconut tails on a parchment-lined baking sheet and refrigerate for one hour to set.

Keep the coconut tails chilled until ready to serve. Remove them from the refrigerator a few minutes before serving for optimal texture.