The Leeds-based group, which yesterday reported underlying pre-tax tax profits up slightly at £12.9m for the six months to the end of September, from £12.7m the year before, said revised biscuits plans give it "optionality" should bargains emerge.

The group announced the first phase of its plan to bring its Fox's biscuit operations up to world-class standards, which could be followed by a raid on struggling rivals such as Burton's Foods.

Dubbed Project Golden, the initial stage will see it spend £26.5m on robotic equipment at its three biscuit plants.

However, Northern said this will mean about 200 jobs will go in Batley, West Yorkshire and around 100 at Uttoxeter, Staffordshire, when it introduces new automated production lines. Northern is to create another 80 posts by adding robotics to its Kirkham factory in Lancashire.

Northern originally planned a £40m to £50m superfactory in West Yorkshire or Staffordshire, either adding to the Uttoxeter site or building a new plant near Batley. But the global recession forced it to rethink the plans, as revealed by the Yorkshire Post in July.

With most robotic equipment made in the Eurozone, the surging Euro forced up equipment prices. Coupled with refinancing needs and market concerns over a spending splurge, chief executive Stefan Barden said the project had been forced into a "hiatus".

Northern said it still plans to go from three to two sites, and will install highly-portable equipment. It will review its strategy in 18 months, and said the changes will generate a return on investment of more than 20 per cent, boosting profits by 2011.

"Importantly it delivers a lot lower peak cash outlfows and it allows some optionality in case there's future consolidation," said Mr Barden. "People talk about Burton's and a number of others."

Burton's Biscuits, part of Burton's Foods, makes Jammie Dodgers and Wagon Wheels. Burton's Foods was bought by private equity firm Duke Street Capital in an estimated £210m deal in 2007, reportedly beating competition from Northern Foods and United Biscuits.

But surging commodity prices hit the company and in September Burton's was taken over by its lenders in a debt-for-equity swap, leaving Duke Street with a minority stake and handing control to Canadian Imperial Bank of Commerce (CIBC) and Apollo Global Management.

"If they have got money to spend I would expect Northern Foods to be looking at consolidation in the sector, especially if there's the possibility it would be a bit cheaper," said one analyst. "I wouldn't be surprised if they are looking at Burton's."

Mr Barden said: "If something else came up in the next 18 months to two years that enabled to improve the market or the industry structure, then that's something we should look at."

The company is on track to meet market expectations, he added. Revenues over the six months grew 2.9 per cent on a like-for-like basis to £467m, led by campaigns such as its Fox's Vinnie advertisements, featuring an animated cross between a dog and a panda. Advertising and talent recruitment spend was up £2m against last year, Mr Barden said.

The group is also doing "feasibility work" at its mothballed Fenland ready meals site, closed last year when it withdrew from a loss-making contract to supply Marks & Spencer.

"There's some interesting stuff going on," said Mr Barden. "I'm 80 per cent sure something is going to come out of it."

It is also maintaining its dividend at 1.55p.

CIBC declined to comment.


What the analysts say

Analysts, who previously warned big capital spending projects come with a "health warning", roundly welcomed the Project Golden decision.

Analysts at Shore Capital said: "We believe this is potentially a very interesting development for the UK biscuit market."

Stockbrokers Panmure Gordon said: "We are pleased that Northern has chosen to upgrade existing facilities rather than build a new factory."

However, Finncap analysts queried the logic of the plans. "The release also alludes to the objective being 'to transition from the current three sites to two world class facilities'. So why invest in all three sites?"