If Gillian Kyle is a name which doesn't ringing any bells, let's try her other one.

She is the Tunnock's Teacake lady, the business consultant-turned-textile designer who, four years ago, had the genius idea of screenprinting a familiar chocolate biscuit on to a canvas bag. Today her range of patriotic-yet-kitschy giftware is sold in museums, art galleries, Frasers, Jenners and 200-odd other outlets.

Kyle, 34, is the first person to admit amazement at the way a nation has taken her products – featuring Caramel Wafers, Scottish Pride sliced bread, Creamola Foam and other foodstuffs that do not feature in the Dukan Diet – to heart. "We constantly have folks telling us how much they love them. How strange and wonderful to live in a country that counts chocolate biscuits, fizzy juice and small mutton pies amongst its national treasures."

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As a business model, however, her original idea has a flaw. Tourists and overseas visitors, big spenders at the museums and National Trust properties where Kyle's tea towels and mugs are on proud display, know nothing of Mr Tunnock and his work. Their teeth remain unravaged by the Wham bar. And a T-shirt celebrating a patriotic plain loaf is unlikely to sell heavily in England.

Which is one reason why Kyle is expanding away from the confectionery-based designs. (Another is that she is on maternity leave and is spending some time at home in the south side of Glasgow with her first baby, Rufus.) Her new range, called Local Heroes (And Villains), still takes a quirky look at Scottish achievements. This time it's based on personalities rather than carbohydrates: Billy Connolly, Mary, Queen of Scots, Bonnie Prince Charlie and even Burke and Hare are celebrated in mugs and coasters.

She has also stepped away from the drawing board – this range is designed by City of Glasgow College student Clare Forrest. Kyle's little sister, Katrina Mather, is currently running the business from a small studio in Glasgow's Hidden Lane, with the help of one other member of staff.

Kyle may be out pushing the pram, but she is still the brand's driving force. "What we've done already is celebrating Scottish branded icons, so this is a natural extension of that, celebrating great exports, inventions and inventors, entertainers, characters. We asked, 'Who is iconic, who do we all relate to as Scots, who will be recognised and loved by other nations as well?'"

Some did not make the cut. "I love Rikki Fulton," Kyle admits. "I really wanted to do a Reverend IM Jolly one. I spent a lot of time watching Scotch and Wry on YouTube for research." Many laptop hours later, when she realised Mather had no earthly idea who Fulton was, he was regretfully binned. Others were included even though they are not conventional heroes. "There is such a great story to Burke and Hare. And Mary Queen of Scots is not exactly a saccharine piece of work."

They are great characters and tales, so why was Kyle's first instinct to put a Tunnocks tea cake, rather than William Wallace or Stirling Castle, on a canvas bag?

David Guy, who runs the Scottish office of international branding consultancy Billington Cartmell, has an explanation. The company has just finished a major study of Scottish identity for a leading consumer brand and their painstaking research unpicks the Scotland-wide appeal of Kyle's intuitive designs.

"The key to Scots today is a balance between modernity and traditionalism," he says. "There is great pride in the history and the landscape, its welcome and warmth. But we are also enterprising and entrepreneurial. And witty – Scots are revered around the world for their sense of humour.

"Gillian Kyle has nailed all of these. She has landed the sweet spot between modernity and tradition brilliantly."

The intelligence and humour in Kyle's work chimes with customers in a way that a straightforward logo shoved on to a baseball hat could never do. "Scots are smart and savvy enough to appreciate that these items have a design point of view," Guy continues. "They are not a tartan-and-shortbread pastiche. Our wit is self-referential. We have a great ability to look at our own past and have fun with it."

Wearing a T-shirt celebrating a heart-attack breakfast designed by a Glaswegian is a multi-layered statement. "We are very good at self-loving and self-loathing. Of course, if anyone else does it, we take massive offence."

It's no surprise to Guy that they appeal to the expat market: today's Scots abroad are bar tenders in Melbourne and bankers in Hong Kong. "They are getting younger – it's no longer all about Andy Stewart. They want wittier products."

And if the pawky humour does not win the customer's heart, there's always the ethical argument. Unlike many souvenirs and gift shop items, all of Kyle's products are manufactured in the UK. She explains: "Much as we would love to do everything in Scotland, the infrastructure just doesn't exist." Finding reliable suppliers has not been easy but, after much trial and error, Kyle's mugs are made in Stoke-on-Trent while the tea towels, aprons and canvas bags are made in Lincolnshire. Cards are printed in the central belt and coasters are produced in Stirling.

"We have been through a lot of different suppliers who didn't make the grade. There isn't a lot of choice – the people who make our textiles are one of one or two options who can do it well enough. But it's great to be able to do in the UK, to keep manufacturing here and support British jobs."

Kyle pays for her principled stance in many ways. She would love to add tin products – biscuit tins, pencil cases, lunch boxes – but can't find a suitable manufacturer. A plan for foil-backed notebooks has been scaled back to less ambitions stationery items – the cost of producing higher-spec versions here was prohibitive. And, having blazed a trail for kooky textiles, she is now finding a whole lot of other small-scale businesses looking for a slice of the novelty baby bib market.

"When I started in 2008 there wasn't the same proliferation of that kind of stuff. Now you can go to a kitschy craft fair with afternoon tea and cakes every weekend of the year." The old-school factories are scooping up much of this business, which is good news for them, but gives Kyle logistical problems.

"In terms of British industry it's quite exciting. The few manufacturers left are actually booming, their lead times are going up and up. They are having to expand and take on new sewers."

Kyle now uses organic cotton wherever it is possible without compromising a design. This raises her unit costs without making the product noticeably more attractive to the consumer.

"I don't know if that matters a lot, yet, to the end user. There's an element of education still to be done on why it's important, not just a gimmicky buzz word.

"If we had the option to do it, I thought we should do it. Cotton production is nasty in the third world. It uses eight times more pesticides and nasty chemicals per hectare than any other crop, which is pretty massive. And huge amounts of water."

When they can talk their customers through the issues, either in person or on Facebook, where there is a thriving GK community, Kyle and Mather find them receptive and willing to pay the ethical premium. "Our wholesalers say a different story, that people in shops look at the price points and think, Jeezo, how are we charging £8.50 for a tea towel. We can't always be there to explain that we only produce in small runs compared to bigger competitors who do 20,000 tea towels at one time."

Kyle never planned to take over the giftware world one teacake at a time. Growing up in Glasgow in the 1980s she had quite different ambitions. "The Iron Lady and her handbags made quite an impression and I wanted to be the Prime Minister. Into my teens I was dead-set on journalism. I'm not quite sure how it happened, but I ended up studying International Business and Modern Languages at Strathclyde."

After graduating, the fast lane, power suit and club-class lounge beckoned as Kyle put in the hours with top consultancy firm Accenture. She hated it. "The insane hours and cut-throat internal competition were not for me." Plan B emerged: she would be a fashion designer. Studying at Cardonald College, followed by Glasgow School of Art, she was convinced London Fashion Week and the cover of Vogue were the next stops. "One very tough summer with a well-known designer in London killed that idea. The pressure and stress was immense: 15 hour days, chain-smoking, sleeping in the studio. I admired their drive but knew this was a lifestyle that would make me ill. I'm not against hard work but I would never volunteer for such an extreme lifestyle."

Back in Scotland, what next? "I loved living in Glasgow and felt that something was happening between the art, design, music and fashion scenes. But creative jobs were so thin on the ground that the only way to stay here was to start something myself. I decided to make some stuff and take it from there."

A conversation with Tom – the art lecturer who was then her boyfriend and is now her husband and father to young Rufus – got her scribbling in the right direction. She recalls: "We talked about the Scottish psyche and our relationship with food. I did some drawings of Tunnock's Teacakes, Scottish Plain loaves and bottles of Irn-Bru and printed them on to T-shirts, aprons, tea towels and tote bags."

Before the dye had time to dry on the cloth, people wanted to buy them. She had sold several before she even left the print studio at Glasgow School of Art. "I took the rest out to a few wee local craft fairs. By Christmas it was obvious that, despite having no idea about minimum orders or delivery costs, I had the makings of a real business."

Nothing she had learned at university or as a consultant was relevant to her brave new career of selling canvas bags to couthy craft shops. "I cringe now when I think how unprepared I was and how little I knew about how to sell to other businesses. I thought shops would want to buy hundreds of items at a time when in reality they wanted five. I remember one potential customer asking me how much delivery would be – that was the first time I had even thought about it and I had no idea how I would even do it, never mind how much it would cost. It was a baptism of fire, but also the best way to learn."

It was not easy persuading shops to put their faith in a teacake. "The GK brand is becoming known now, but it was a hard sell at first to convince potential stockists that their customers would buy into my range. In many ways the Scottish gift market was and is very conservative."

Time has proved her right. The brand's success is, she says, down to a quirk in the national psyche. "I'm just pleased that so many people recognise the same things I do. It's such a Scottish thing: we all get behind Andy Murray. Or a chocolate biscuit."