CThe factory will cost the family company €12m and will create around 100 industry jobs in the region.
Construction is set to begin in February 2006 with production starting by September, which will facilitate further growth for the business after its acquisition of Granini confectionery.
Katjes most popular brand is Yogurt Gums, backed by a strong advertising campaign and long-term relationship with model Heidi Klum.
Ahoj-Brause, Sallos and Hustlinchen are also important brands for the business, which prides itself on the quality of its products ensured through meticulous testing.
Katjes has also promoted its 'natural' image, not using artificial colourings since the early 1980s and last year removing gelatine from a large number of its products. The use of natural ingredients has become increasingly important for Germans, who now eat more organic food than any other European nationality.
The confectioner has also won plaudits from local Potsdam officials for building a site in an area in much need of regeneration. It is hoped this will encourage more companies to shift production back into Germany from abroad - something that could help to relieve soaring unemployment rates, which may then increase consumer spending power.
Katjes' investment should also aid the company, which currently employs 520 people, to improve on the €180m revenue that it was reported to have achieved in 2004.