It follows a five-year programme looking at innovative uses for strong wool, which traditionally goes into carpets.
The WRONZ-led wool research initiative develops unique wool particle products with applications from cosmetics to printing.
Wool Source has established a pilot production plant at Lincoln University in order to prove the commercial feasibility of the new products.
The just launched company's chief executive, Tom Hooper, said the new ingredient products are just one of the areas that will help revitalise the strong wool sector which has seen declining returns for years.
He said wool will be deconstructed down to a cellular level to make particles, powders and pigments.
"It's then reconstituted to form a very fine wool powder that can be used in a range of applications such as personal care, cosmetics and pigments.
"Personal care is shampoo and other hair related products that have keratin in them. Keratin is a form of protein that wool is a very good source of and this is an excellent replacement ingredient to some of the other sources of keratin that goes into those products," he said.
He said there are a range of uses in the cosmetic sector including products such as bronzers.
"Wool powders will be good for any product that needs colour as one of its strengths is taking up colour very well."
Hooper said they have been testing products in international markets for some time.
"But there is a big difference between expressions of interest and a solid commercially viable order that says 'yep this works for us and we want to buy it'."
Because of Covid-19 and the fact no one can travel Hooper said they will bring in international resource to represent Wool Source in various international markets.
Hooper said once Wool Source has proven the commercial viability of the products it will find a New Zealand partner to take on large scale production.
Investment is coming from the Ministry for Primary Industries to fund further product lines and commercial development as part of the wider New Uses for Strong Wool programme.
MPI is contributing $1.95 million via its Sustainable Food and Fibre Futures (SFF Futures) fund alongside $2.92 million from WRONZ.
The Strong Wool Action Group (SWAG) is jointly funding Wool Source's market engagement alongside WRONZ.
Investment has also come from MBIE which put $8.4m of the $21m into the seven-year project in partnership with WRONZ which has focused on deconstructing wool to a cellular and particle level and then reconstructing it for various product uses.
