No, this is a case where you can actually take the translations literally. =) "The strawberry is in sugar" doesn't mean "the strawberry is made of sugar" in English. It just means that the strawberry is sitting in some sugar. As far as I know, the Turkish sentence means the same.
When you use "içinde," its associated noun (whatever would be the object of the preposition in English) needs the genitive case. Here, that's the sugar (it's almost like the in belongs to the sugar), so it becomes şekerin. There's a good explanation in the Postposition tips and notes: https://www.duolingo.com/skill/tr/Prepositions