The firm said the extension to the Hobart factory, to be completed by January 2007, will improve chocolate moulding capacity and introduce high-tech wrapping and packing facilities.
This will boost the plant's annual chocolate output of 45,000 tonnes by 10 per cent, in response to growing demand for confectionery in Australia and the Asia Pacific region.
Cadbury is the leading confectioner in Australia - currently the world's 11th largest confectionery market - taking a 55 per cent share of chocolate sales.
Now the company intends to extend its presence across Asia Pacific.
In Malaysia Cadbury has introduced confectionery products manufactured in Australia and New Zealand, garnering a 24 per cent market share of the country's chocolate sales as a result.
The factory upgrade will also provide room for the development of new products, building on the range of established brands already available to Australian consumers.
"The new moulding equipment will enable us to meet the increasing demand for Australians' favourite chocolate, Cadbury Dairy Milk, as well as produce a range of new products for the Australian market," said Mark Smith, managing director of Cadbury Australasia.
The firm has also announced it will buy a further 0.64 per cent capital share of Turkish confectioner Kent, taking its total holdings in the business to 96 per cent.
Cadbury originally acquired a 51 per cent stake in the Turkish manufacturer in 2002 at the cost of €109.59m cash and assumed debt.
Kent, maker of Villa chocolate and Relax gum, exports to 66 countries including those in the Middle East, Balkans and Russia, and the surrounding area. Exports represent approximately a third of volumes.
Founded in 1956 by the Tahincioglu family, Kent is the largest sugar confectionery manufacturer in Turkey. It has the leading share of the packaged sugar confectionery market - 66 per cent - and the second largest share in the chewing gum market - 14 per cent.