The company will build a new moulding plant, including state-of-the-art wrapping and packing equipment, and hire up to 50 new staff over the next five years to operate the expanded facility.
The investment will make the Claremont plant the firm's biggest chocolate factory in the Asia-Pacific region.
Cadbury Schweppes Australia and New Zealand managing director Mark Smith said the improvements were being made to "meet the increasing demand" for Cadbury Dairy Milk in Australia, as well as produce a range of new products for the Australian market.
Cadbury Schweppes has a 55 per cent share of Australia's chocolate confectionery market, giving it a strong lead over Nestle and Masterfoods, with 18 and 19 per cent shares respectively.
The market leader is benefiting from steady growth in chocolate consumption in this market. Volumes of chocolate sold during 2004 increased by 3 per cent on the prior year to reach an estimated 108,000 tonnes, and sales of more than A$2 billion, according to analysts at Leatherhead Food.
During March 2005, Cadbury strengthened its position in the countlines market with the launch of the Boost brand and its Yowie brand also remains especially popular with children, says Leatherhead.
The upgrade will allow the factory that currently produces 45,000 tonnes of chocolate a year to make another 4500 tonnes per year. The Tasmanian government contributed A$450,000 towards the project.
"We are committed to growing our business and this expansion of our Tasmanian plant is reaffirmation of that commitment," said Smith.
The company previously spent A$25 million on an expansion of the plant in 2001.
The new wrapping equipment is expected to be operational in November this year, while the moulding plant will be commissioned in January 2007.
Cadbury also has facilities in Victoria as well as other Asia-Pacific markets New Zealand, India, China and Malaysia.