Cadbury Schweppes is to invest £40 million at its Bournville factory in Birmingham to meet the growing demand for Cadbury Dairy Milk.
The move comes as a big boost to the region after major setbacks such as the collapse of MG Rover, and job losses at Peugeot and Jaguar.
The investment will include a new 20,000 tonne moulding plant with state of the art wrapping and packing lines, along with a new chocolatemaking area. Work will begin later this year and is due to be completed by the autumn of 2006.
A spokesman said the development would create some new jobs though he could not say how many. The Bournville plant currently employs 3,000.
"This is more a commitment to the area," said the spokesman. "It is good news for the region's economy especially at a time like this. At a time of doom and gloom around the West Midlands this is a success story. It is a sizeable investment."
Bournville was the " spiritual home" of Cadbury Schweppes and still its biggest factory, he said.
Following a decision by Cadbury Trebor Bassett to focus on key brands, Dairy Milk has forged ahead over the last four years, growing consistently since 2001.
It is the number one chocolate brand in the UK and consumers buy £320 million worth every year. It was up more than ten per cent in 2004, despite recent concerns over obesity.
The spokesman said people understood that chocolate was a "treat" and eating it had to be part of a balanced diet.
Cadbury Trebor Bassett managing director Simon Baldry said: "We have been producing the UK's favourite chocolate at Bournville for 100 years and the announcement we are making enables us to build on the site's heritage of manufacturing excellence. It is a tremendous vote of confidence in our highly skilled workforce."
This is the centenary of Dairy Milk, and Cadbury Trebor Bassett is marking the milestone with a multi-million pound campaign push.
Mr Baldry added: "We are proud of our long-standing association with Birmingham and are delighted our revitalised manufacturing capability at Bournville will enable us to meet growing consumer demand well into the future and focus on the next 100 years of Cadbury Dairy Milk."
The factory also produces brands such as CDM, Cadbury Creme Egg, Cadbury Roses and Milk Tray and its Easter Egg range.
Cadbury Dairy Milk was first launched in 1905 as the first bar to use full cream liquid milk rather than powdered milk. Variants include Fruit and Nut, Whole Nut, Mint Chips, Caramel and Biscuit.