When Gruff Rhys started gigging his second solo album, Candylion, he found himself attracting an unexpected audience. He’d look out into the audience and see swaths of children. “People would bring their kids along,” the Welsh singer-songwriter marvels. “I was a bit perplexed by the new demographic, to be honest.”

That demographic is dictating the album’s next life. Working with National Theatre Wales alongside playwright Tim Price (The Radicalisation of Bradley Manning) and director Wils Wilson (I Want My Hat Back), the 45-year-old singer-songwriter is turning it into a full-blown piece of children’s theatre: The Insatiable, Inflatable Candylion – a gig for four-year-olds and up.

“People don’t take their kids to see live music,” says Price. “It’s always on late at night in non-child-friendly venues, so we almost never get a chance to share these experiences intergenerationally. Maybe we’ll tap into an experience that audiences are really craving.” He used to play Candylion to his baby son. “When you become a parent you realise that you don’t know any nursery rhymes, so I found myself singing Gruff Rhys at four in the morning to a child who wouldn’t sleep.”

Facebook Twitter Pinterest The Candylion music video that inspired the stage show.

Two years ago, the trio turned an album by Rhys’s electro-pop duo Neon Neon into an immersive theatrical experience. Praxis Makes Perfect, which played in a secret location in Cardiff, was a complete one-off: a hybrid of pop gig and theatre. “We were creating a form none of us had ever seen before: a dramatised gig with a genuine pop star onstage.”

As a concept album, Praxis was a musical biography of the radical leftwing publisher Giangiacomo Feltrinelli. Onstage, Rhys and Boom Bip played in the background while communist party officials leapt out of a 12ft filing cabinet or filled shopping trolleys to a disco beat. At one stage, during his stint in Cuba, Matthew Bulgo’s moustachioed Feltrinelli played basketball with Fidel Castro. “It’s a very unique process,” says Price. “People of different disciplines working together, each experts in their own field and each leading at different points. Sometimes music will pick up the story, sometimes dramatic text, sometimes movement.”

Facebook Twitter Pinterest Candylion’s characters are inspired by manga. Photograph: Mark James

The stage show had been Rhys’s suggestion. While touring, he’d read Caetano Veloso’s book Tropical Truth, about the Tropicalia movement in 1960s Brazil. With the country under martial law, Veloso would play underground gigs alongside poets and playwrights in Rio de Janeiro, turning concerts into subversive theatrical events. It led to his exile in 1969. “They’d make fun of Beatlemania by staging screaming crowds of drag performers or have the lead singer carried out in a stretcher, covered in blood – all these dramatic interventions into ordinary gigs,” says Rhys. “I’d been touring fairly conventionally for a number of years and it seemed to suggest a new way to enliven that experience.”

Rhys found mainstream success in the 90s with the Super Furry Animals, but his work elsewhere has been more singular. His 2014 solo record, American Interior, a concept album based on the life of the Welsh explorer John Evans, was released as a film, a mobile app and a book. It’s one of the reasons Price so admires him: “He’s continually pushing his own form and practice, refusing to repeat himself.”

Rhys believes he’s just finding the form that fits. “Some songs need a music video. Others need a touring slide show or a book. Maybe a record like Candylion needs a stage show influenced by Japanese manga characters …”

Facebook Twitter Pinterest Gruff Rhys at the End of the Road festival in 2014. Photograph: Burak Cingi/Redferns via Getty Images

That’s exactly what it’s going to get. “What we learned with Praxis,” Price explains, “is that as long as everything comes from the music or from Gruff’s world, it will feel authentic.”

At first listen, Candylion is almost unbearably twee: an earful of syrup. The title track, with its plinky-plonky xylophone, is the stuff of children’s television theme tunes. Con Cariño is a soothing sirensong lullaby; Cycle of Violence disguises fraught, panicked lyrics with dreamy sha-la-las. “It’s quite a colourful record,” says Rhys. “My intention was to write an acoustic album of quite sweet songs, which I sometimes subvert with darker lyrics.” Sure enough, one pairing runs: “Dreams can come true / Nightmares can also.”

With each subsequent listen, however, you tune into more of these layers and, almost unnoticed, the music gets into your bloodstream. Much as you try to resist, there’s something lovably ludicrous about it. You bliss out to its psychedlic twinkles and nod along to its wheezing harmonicas. Some songs swerve off into Welsh language. “For good measure,” Rhys deadpans, “we finished off with a 15-minute ballad about an aeroplane hijacking. We might do that as an encore in the late-night gigs.”

By day, the darker side of Candylion, its political edge, will be subtler. Pixel Valley, the Candylion’s natural habitat, shared with other fantastical amalgams like Polar Pear and the Sledgehog, bears certain similarities to our own: a climate of austerity and constricted civil rights. It’s political theatre for a pint-sized audience. Veloso and Feltrinelli would be proud.