Industry Deep Dive: Pre-rolls, Papers, and Cones

The pre-roll is one of the most recognizable cannabis products. It’s ubiquitous in many legal cannabis markets, both medical and adult-use. What many people don’t realize, though, is that the rapid growth of this market segment has led to serious innovation. Pre-rolls are no longer the simple 1-gram cones with a filter at the end. You’ll find lots of sizes, infusions, and more.

The types of pre-rolls available, how they are made, and the way they are marketed has evolved significantly since the emergence of the legal cannabis industry. This industry deep dive explores the pre-roll market growth, how the space has changed, and how cannabis businesses can leverage this market.

What does the growth of the Pre-rolls market look like?

Although it’s far from the largest cannabis market segment, pre-rolls represent a significant portion of the U.S. cannabis industry, accounting for 12.7% of market share and generating more than $1.5 billion in sales in 2022. It’s also a fast-growing space, more than tripling in terms of sales revenue since 2018, when the space generated $406 million in sales.

What’s driving that growth, though, may be most interesting. According to Harrison Bard, co-founder of Custom Cones USA, it’s rare that customers stop in just to pick up a few pre-rolls. Instead, they are most commonly added alongside an order as an afterthought or impulse buy.

“Pre-rolls are one of the most attached items,” he said. “[Cannabis] flower is still the most purchased item [in a dispensary] by itself, but pre-rolls have the highest attachment rate. They’re a great add-on item that can increase your customer’s average basket size.”

Leading the way in the space are three California companies Sublime Canna with $33.2 million in sales, Jeeter with $27.2 million, and Lowell Herb Co. with $26.4 million in 2020. The rapid growth of the pre-roll market segment has nearly all brands that produce pre-rolls eyeing expansion in the coming years. According to data from Headset and Custom Cones USA, 95.7% of preroll brands expected to expand following 2020.

The many types of Pre-rolls on the market

As the pre-roll market has grown, the variety of pre-rolls has increased as well. While it’s most common to find 1g pre-rolls in new and developing markets, more mature markets have an entire selection that includes multi-packs of pre-rolls (including two-packs, five-packs, and 10-packs), pre-rolled blunts, 0.5g pre-rolls, and the mini “dog walkers” that range between 0.25g and 0.35g per pre-roll.

Today, 1g pre-rolls remain the most common seller, accounting for 62.6% of the pre-roll center, according to the report from Headset and Custom Cones USA. Close behind are 0.5g pre-rolls at 43.2%, followed by 0.75g pre-rolls at 18.7%, >0.5g pre-rolls at 10.8%, and then >2g pre-rolls at 12.2%.

But it’s not just the size of pre-rolls that’s increasingly varied; it’s the types of pre-rolls available. One type of product, in particular, is becoming a mainstay of the sector.

“We’re seeing infused pre-rolls pick up way more quickly in new markets,” Bard said.

Infused pre-rolls are those that are brushed with extract and, sometimes, rolled in kief, providing an extra potent session. In fact, these types of pre-rolls accounted for 42% of all pre-roll sales in 2022. That’s a marked increase from 2018, when these types of pre-rolls represented just 12.7% of the overall pre-roll market segment, according to the report from Headset and Custom Cones USA.

There are also mixed strain pre-rolls, which include a blend of multiple cultivars (also called strains) designed to accentuate a particular set of effects. Pre-rolled blunts are also rapidly rising in popularity, Bard said.

And each of these product types come in a variety of wraps beyond the conventional refined white paper, such as hemp wraps and flavored wraps. Today, the classic wrap accounts for just 44.3% of the market, followed closely by organic hemp at 35% and unrefined brown wraps at 23.6%, according to the data from Headset and Custom Cones USA. Non-organic hemp is next at 17.1%, followed by natural leaf at 10.7% and cigarette tubes at 8.6%.

It’s also common to find a wider range of quality in more mature markets. A common misconception is that pre-rolls contain mid-shelf cannabis or shake that falls from the buds in transit or during the trimming process, but that’s not always true. While there are certainly lower quality pre-rolls out there, some brands have dedicated themselves to using top shelf flower in their products for consumers who want a more premium experience.

“A lot of companies are emphasizing fresh products. They’re making sure pre-rolls are created to order; they’re not just making 50,000 per month and letting them sit around for ages before going to retail,” Bard said. “I’d liken it to sushi in the grocery store — it’s only good for a few days. After these pre-rolls age too much, they’re processed into an edible or concentrate.”

How dispensaries can make the most out of pre-rolls and paper products

There are a few ways dispensaries can take advantage of pre-rolls (and other paper products like cones) to increase the average transaction size and bolster revenue. Follow these tips to make the most out of pre-rolls and related accessories at your dispensary.

1.    Display pre-rolls prominently at the point of sale

Customers are unlikely to buy what they can’t see, and that includes pre-rolls. Just because they’re not the most sought after product doesn’t mean they shouldn’t be prominently displayed. And, since they’re a common add-on item or impulse purchase like a candy bar at the grocery store checkout aisle, placing them close to the register incentivizes your customers to add them to their basket at the last minute. Notably, not every state allows for this kind of product access on the dispensary floor, so you may need to get creative in states where customers can’t pick up the products themselves.

“Think about how pre-rolls are merchandised in the store,” Bard said. “Some dispensaries keep pre-rolls in buckets beneath the counter, but better merchandising increases sales. Make sure they’re eye-level behind the counter so customers are seeing them at the point of sale.”

2.    Offer pre-rolls as a way to try out something new

Promoting your pre-rolls as a way to try out a different cultivar or brand can prompt customers to consider purchasing additional products. For example, if you’re stocking a new cultivar that you think will be popular, offering high quality pre-rolls that contain that flower could be a good way to get the word out among your customers and drive sales of that flower in the future.

“Pre-rolls are a good way to try out a brand,” Bard said. “It’s like a little sample, an easy way for someone to try new flower or a brand compared to buying an eighth or concentrate. It’s a great way to get more brand exposure by offering a lower price point to consumers that is more accessible.”

3.    Keep a variety of pre-rolls in stock

As the pre-roll market evolves, there are more types of pre-rolls available. Don’t just stock the typical 1g pre-rolls; your customers are likely to expect pre-rolled blunts, multi-packs, and infused pre-rolls as well. Ensuring you have a diversified inventory of pre-roll products increases the odds that your customers will find the type of pre-roll they prefer.

“You definitely want to offer multi-packs and infused pre-rolls,” Bard said. “I would say flavors are important too. Variety is really important for a dispensary, so offer different flavors and strains.”

4.    Include pre-rolls in product bundles to boost sales

If you want to encourage customers to purchase larger baskets, consider offering pre-rolls in a product bundle at a favorable price. Your customers will feel like they’re getting a price break on product, and you’ll use pre-rolls to drive larger transaction sizes. This can help boost revenue per customer and move more product, especially when you’re looking to bring in new inventory.

5.    Sell rolling papers and cones for customers who roll their own

There are some consumers who prefer to work with flower they’ve purchased in bulk, as well as some who avoid pre-rolls due to a misconception that they are necessarily lower quality products. When it comes to these consumers, it’s good to keep rolling papers and empty cones on hand.

“Flower remains the number one selling category, so for people who don’t know how to roll, cones are really popular, and papers are popular with those who know how to roll,” Bard said. “Also, pre-rolls have this negative stigma that they’re low quality, so some people won’t buy them even though there are high-quality pre-rolls on the shelves. It’s still good to have empty cones for those customers.”

Automation and the cannabis pre-roll market

In the early days of the cannabis industry, it was common for dispensary employees to spend a portion of their day manually producing pre-rolls to sell throughout the dispensary. Now, that’s far less common, as automated rolling machines — some that are quite sophisticated — have become the norm. Automated pre-roll machinery is capable of producing thousands of pre-rolls per hour while freeing up dispensary staff to attend to more pressing tasks.

Paxiom by Canapa Solutions is one such pre-roll automation company that has pioneered this space with units like its JuanaRoll 8-channel, which is capable of turning out 4,000 pre-rolls per hour, according to digital marketing specialist and project manager Val Miller.

“All companies typically begin with hand packaging or semi-automatic volumetric systems,” Miller said. “As companies grow, it becomes very difficult to scale without automation to produce high productivity and consistency.”

Automation at this scale is most likely to be used by manufacturers who are creating high volumes of products to ship to retail locations throughout their state, rather than the dispensaries themselves. They can significantly cut down the time and costs required to produce enough pre-rolls to fill multi-packs at scale, for example. The volume needed to meet that demand can be quite immense, depending on how many dispensaries a manufacturer is selling to.

To improve scalability and meet growing demand, Miller said Paxiom developed the JuanaRoll as a modular solution that could begin as a one channel machine and expand as a company needs up to a maximum of eight channels. There are fully automated and semi-automated models available.

But just because pre-roll production is trending increasingly toward automation doesn’t mean the human element is entirely eliminated, though. Success still requires coordination between manufacturers and the automated equipment vendor.

“Filling and packaging pre-rolls is very difficult and requires a team effort between us, the manufacturer, the cone supplier, our customers and the dedicated people that operate them,” Miller said. “It’s important to work within a cohesive group that have the same goals and can collaborate.”

Pre-rolls are a growing wave of the future

The pre-roll space doesn’t often get as much press as whole flower or concentrated extracts, but it’s just as unique and lively. As pre-roll sales grow well beyond the $1 billion mark, the space has continued to evolve along with the rest of the cannabis industry. Clearly a mainstay for any manufacturer or retailer in cannabis today, pre-rolls are an important hallmark of the industry and will continue to be central to the space for years to come. Whether you’re serving consumers or manufacturing to meet the needs of dispensaries, understanding this growing market and how to best compete can be an important recipe for success.

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