Kraft, whose brands include Maxwell House coffee and Philadelphia cheese, is now offering a cash sweetener of an extra 60p per share to Cadbury shareholders.
The increased cash offer is an alternative to receiving Kraft shares.
The US food giant had previously offered 300p and 0.26 Kraft share for every Cadbury share. This valued the company at £10.6bn, in its bid to acquire the maker of brands including Dairy Milk.
It is funding its increased offer after announcing today (Tuesday) that it had agreed to sell its North American pizza business to Nestlé for $3.7bn.
Commenting on the new offer, Kraft said: "Kraft Foods is doing this because of the desire expressed by some Cadbury security holders to have a greater proportion of the offer in cash, and because Kraft Foods shareholders have expressed a desire for Kraft Foods to be more sparing in its use of undervalued Kraft Foods shares as currency for the offer."
Full details of the offer have yet to be disclosed, but the deadline for Cadbury to respond has been extended to 2 February.
Rival food groups Hershey, the US chocolate maker, and Ferrero, the Italian chocolate group, have also expressed an interest in bidding for Cadbury.
Nestlé had also been linked to Cadbury, but today it said: "After discussions with the UK Takeover Panel regarding the potential for further speculation in respect of Cadbury, following Nestlé's recent announcements, Nestle confirms that it does not intend to make, or participate in, a formal offer for Cadbury."
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