The workforce at Bremworth Carpet's Whanganui plant will grow by 15 to 20 per cent over the next 12 months, with a new woolstore being built at the Castlecliff site.
Bremworth chief executive Greg Smith said the Whanganui component of the business was going from strength to strength.
"It's growing fast," Smith said.
"The yarn made in Whanganui is different to the yarn made in Napier. It's for our premium, top-end product.
"We can't get enough of it and the yarn plant needs to expand."
That involved hiring an extra 12 staff members, Smith said.
"We are looking for people right now to scale up, and part of that is due to the success of the yarn that is being made. It is unique to the Whanganui plant within New Zealand.
"That invest [in Whanganui] will continue. The new wool store will be for Elco Direct, which is our direct wool-buying business."
Bremworth had begun developing a prototype compostable rug which contained no plastic materials, Smith said.
The yarn for it was developed and made in the River City.
"Most of the rugs and carpets in the world are made from synthetic fibres, so going back to wool is something Bremworth is committed to," Smith said.
"Natural fibres having a life beyond their original use and intent is a great story but then, when that finishes, you can feel confident when you put that product into the ground.
"It will compost naturally and add to biodiversity as opposed to plastic, which just doesn't break down."
Sustainability lead at Bremworth, Kirstine Hulse, said while wool was a natural fibre, most wool carpets used a polypropylene backing and latex which contained synthetic materials, preventing them from being composted.
"Crossbred sheep and alpaca fibres were used in the first prototyping process but more trials are under way to find alternatives to the use of alpaca yarn, which is in limited supply in New Zealand," Hulse said.
"By preserving the natural integrity of the fibre we can increase the number of opportunities for product circularity, increase the number of secondary uses for used carpet and significantly reduce volumes of textiles entering the landfill."
Whanganui was important to Bremworth because the "real magic" of its products was in the yarn, Smith said.
There were currently around 100 workers at the local plant.
"We have dedicated, loyal team members in Whanganui, many of which have worked out of that plant for the last 30 or even 40 years.
Sixty-eight jobs were lost in Whanganui in 2016 when the company, then called Cavalier Bremworth, announced it was consolidating a major part of its operation in Napier.