The Hobart Cadbury factory will close its doors for five weeks at the end of this year.
Cadbury's parent company Monodelez International said the Claremont factory would shut down over the Christmas period due to lagging sales and a bigger-than-expected stockpile.
The company said it was part of the process of matching supply to demand forecasts, which could fluctuate through the year.
Dairy farmers who supply Cadbury said they were confident their milk would go to other processors and their contracts would be honoured.
John Short of the Australian Manufacturing Workers Union said the factory usually closed for a fortnight over Christmas but workers would have to take more annual leave this year.
"It appears that the company did really well at the start of the year and got a lot of chocolate made, and they got a bit of a stockpile, but unfortunately they haven't had the sales in the second half of the year they would have liked," he said.
"What this is trying to do is to hang on to their workforce by having a bit longer shut down than they normally would.
"We're working with the company to try to reduce the effect it has on workers."
Cadbury said it would maintain its tourism operations while the factory was shut down.