Italian wool mill Successori Reda has signed a new US$45m, five-year contract to use wool from the New Zealand Merino Company (NZM) in its high-end suiting fabrics and active product ranges.

The deal is the longest of its kind for NZM and its growers and will see 2,500 tonnes of fine Italian-type wools in the 15.8-19.2 micron range shipped to Italy.

The 150-year-old Italian textile leader is one of few companies globally that manage each stage of the production chain, from the selection of wool to the final product.

"Reda have been exceptionally innovative in their approach to this contract," said NZM chief executive John Brakenridge. "By removing the vagaries of the open market and developing a model that guarantees supply of quality wool with a higher value over longer period they have created a win-win. They get the volume of high-quality wool they require and growers get the certainty of good prices for their wool for longer."

Brakenridge explained that the market for fine wool has been highly volatile, with companies reluctant to place multi-year contracts combined with an oversupply out of Australia, which has suppressed prices for the past few years.

He added: "Securing a high-value contract of this length of time is a big deal for our growers. New Zealand produces a small amount of Merino by global standards, so we have to keep working with brands such as Reda that are innovative in their approach. Those that are innovative are the ones which remain profitable."

Fabrizio Botto Poala, Reda global procurement director, said the NZM deal addressed significant supply issues for the company and allows it to continue expanding its product range. He added: "The global textile market is fiercely competitive. We knew we had to innovate to grow, so we took the traditions and technology that we did best and applied them in new ways. We are concerned that if there are not clear signals from the market, growers will stop producing the quality that we need. It's better that we work on this together."

Botto Poala added the deal will also demonstrate Reda's integrity to its consumers. He said: "The final consumer is asking for traceability. They want products that are backed with the highest levels of integrity. The ZQ Merino standard provides this backing. We're excited to be opening up more supply opportunities for our New Zealand grower partners."

Based in Biella in the north of Italy, Reda exports to American, European, Asian and Middle Eastern markets. The company diversified into activewear in 2012 with the launch of sports brand Rewoolution and their fabrics are used in sportswear, as lining for ski boots and helmets, in boardshorts, and waterproof jackets and footwear.

Superfine New Zealand Merino wool woven by Reda is also used in the production of the Allbirds Wool Runners, a simple minimalist sneaker co-developed by former All Whites footballer Tim Brown.