After 136 years, Tasmania's iconic Waverley Woollen Mills is still producing homespun comfort, albeit with a high-tech twist.

Down in Tasmania, where the icy wind is really biting now, there is a very old woollen mill that has kept generations of Australians warm on winter nights.

The Waverley brand will be familiar to many readers. It is produced at Waverley Woollen Mills, one of the oldest textile mills still operating in Australia. No mean feat, considering the competition both local manufacturing and wool have faced in recent decades.

Operating from its original 1874 site at Distillery Creek, Launceston, it is still processing 600 kilograms of raw wool on a good day. The fleece arrives in bales from local shearing sheds and leaves as luxurious blankets, rugs and throws.

On its journey from fleece to fabric, the wool is processed by machines spanning many eras, so visiting the site is surreal; one minute you are inspecting a hundred-year-old blender into which raw fleece is tipped for initial refinement before it's spun into yarn, the next you're looking at a $1 million, high-tech tenter that dries blankets after dyeing.

The heart of the operation, however, is the weaving room, where checked travel rugs destined for Myer and David Jones are coming off the loom, ready to have their loose warp threads twisted into tassels.

It is Melbourne-based Creative Director Leah Paff's job to design the blankets and to convince buyers that having their grandmother's old Waverley blankets is lovely but not enough.

Leah, formerly the Global Textiles Director at the Woolmark Company, joined Waverley Woollen Mills in 2008, after it had been bought and given a new lease of life by Tasmanian businessmen Craig Fraser, Ken Davey and Terence Kirby-Fahey. They made the decision to forge on with local manufacturing and build the local brand with a view to expanding exports to Asia and the US, where it is sold under the Waratah label. That decision meant losing 19, or just over half, of the factory staff as product lines were dropped in favour of focusing on the traditional core product, blankets, and building up sales of rugs and throws.

One of the first steps by the owners was to source all the mill's merino from Tasmania, just like the old days, and introduce a fully traceable supply chain. "The wool can be followed right back to farms that have often been in the same families for generations, and we are working closely with merino and alpaca growers on the mainland as well as Tasmania," says Leah. "That provenance makes the product more special."

Leah is certain the woollen blanket is not a threatened species. In fact, the mill has suspended production of its wool duvets in favour of its iconic blankets. "We are working with a different generation of blanket buyers now, who are fashion-, comfort- and quality-driven," says Leah.

"Blankets are finding a new life as bedcovers. The concept of the clean top-of-bed look has come into vogue. If you look at styling trends at European trade fairs or some of the new boutique hotels, often it's a beautiful woven blanket on top of the bed."

There are three ranges under the Waverley brand: Supersoft, Merino and the Derwent eco-blanket, which combines 70 per cent in-mill offcuts with 30 per cent recycled bottles. The company also produces the fashion-forward Elphin brand, made from natural fibres including mohair, alpaca and silk. The bestseller is the Supersoft blanket in neutral. The Tasmanian merino would have to be one of the whitest naturals in the market, says Leah. Throws now comprise 40 per cent of sales, up from 17 per cent in the past two years.

Having worked in the wool industry for 17 years, Leah estimates she has 25 throws at home. (Her son comes out of his room wrapped in one most mornings.) She keeps a blanket that belonged to her grandmother folded on a chair. It's a treasured family memento – but it's also simply too good to throw out. Guess where it came from?

Wool wise

Known for its naturally coloured blankets and rugs, Creswick Woollen Mills, near Ballarat in Victoria, has been operating for more than 50 years.

Australian Country Spinners, owners of the Patons and Cleckheaton brands, is our largest craft yarn supplier, followed by Bendigo Woollen Mills.

Thanks to the handknit boom, Country Spinners is increasing exports to China and recently spun 15 tonnes of yarn for New Yorker Debbie Stoller's Stitch Nation label.

Mulesing, the clipping of skin at the sheep's tail end to prevent fly strike, has affected some retail markets in the US affiliated with animal rights group PETA, but there are no trade bans in place, says wool-grower group Australian Wool Innovation. The AWI has spent $25 million to date towards developing a more humane but effective alternative to mulesing.