Here are some clues from the lyrics (the lyrics are in quotes, my comments are in parentheses):
"When they found her Christmas mornin"
(She'd been lying there overnight because she was hit by a reindeer Christmas Eve. Who could survive a cold, snowy, winter night, especially an older person?)
"It's not Christmas without Grandma"
("Without Grandma" means she's not there, ie, she's dead.)
"All the family's dressed in black"
(The family is wearing black because they are in mourning, because she died.)
"And a blue and silver candle
That would just have matched the hair in Grandma's wig"
(Note the tense: "would just have", which means she's not there, because she's dead.)
When the song first came out, we all knew it was twisted and even mocked Christmas. Grandma was *killed* by reindeer! But you wouldn't know that if you watch the cartoon. They've made the song into a heart-warming story about Grandma merely getting knocked down by reindeer.
Sorry, but Grandma died. I wonder if people really know that. A cynical song wrapped up in cheery music.