In 1908, Adolph Spreckels, heir to the Spreckels' sugar fortune married a woman 24 years younger than him. His bride, Alma was by all accounts quite attractive. She called her husband Adolph her "Sugar Daddy."
The first known use of sugar daddy is in an episode of a surreal tale with the title Fat Anna’s Future that appeared in the Syracuse Herald on 27 March 1923.
The term may also have been a New York creation of the criminal worlds linked to Broadway in Prohibition days. Sugar was a long-established slang term for money hence heavy sugar was a lot of it. Daddy was an obvious reference to an older man, but it may also have had a link to African-American slang of the time, in which a daddy was a lover with no implications of age.
Definition: Sugar baby: a young female or male who is financially pampered / cared for by a sugar daddy or sugar mama in exchange for companionship (i.e. sexual favours).