The caricature, known as Laku-Pekka , had been used on liquorice wrapping since 1927.
However, the company had faced criticism from abroad and within Finland, where subsidiary Cloetta Fazer Confectionery is based.
In January 2007 British MEP Claude Moraes was interviewed in Finland on his concerns about the packaging.
According to Finnish paper Helsingin Sanomat, Moraes threatened to ask the European Commission and the Council of Ministers about the propriety of the packaging.
The Finnish Consumer Agency and the Minority Ombudsman also advised Cloetta Fazer that the caricature could be seen as contravening the marketing rules of consumer protection law, international regulations on advertising and equality legislation, the newspaper said.
Consequently, Cloetta Fazer unveiled the new packaging at the Design Museum in Helsinki last week.
The new wrapper will not feature the picture of the face but the company says it will retain the bold graphics and black, white and red colours.
" The idea was to preserve the elements of the old design that consumers consider to be strengths: the graphic style, colouring and link to its history.
The new design should also support international sales of the product and enable new products to be launched with the same look ," the company said.
The new wrapper will start to be seen on shelves from April 2008 in Finland and then in other markets.
A statement by the company said that the aim of updating the wrapping was to: " create a look that corresponds to today and the changes, values and attitudes in our society.
The old figure as such will be a thing of the past ."
Other manufacturers have altered their marketing for similar reasons to Cloetta Fazer.
British preserves maker Robertson's (part of Premier Foods) removed the gollywog off jam labels in 2001.
It had been their mascot for 91 years.
Tim Lindblad, Managing Director of Cloetta Fazer Confectionary said that there is great potential in liquorice, it is changing from being a " nostalgic product to a new trend ."
Sales last year grew by 7.7 per cent with only a small investment.
The growth of the liquorice market in Finland grew by 1.2 per cent.
He added: " It is important to keep with the times and further develop liquorice ."
The Cloetta Fazer Group is a market leader confectioner in the Nordic Countries.
According to the company it has a 22 percent market share.
Key markets include Finland, Sweden, Norway, Denmark, Baltic countries, Russia and Poland.
There are production facilities in Sweden and Finland.
The company says that turnover is about €363m.