The Rise of Pre-Rolls in Emerging Cannabis Markets

There is a lot of uncertainty when it comes to opening a new business, let alone starting a new business in a new industry. Experience and data are hard to find, let alone experience and data you can trust to be relevant to your situation.

In recent years, pre-rolls have exploded in popularity—growing at 12% YoY in the US and 38% YoY in Canada. Now, you could argue that this is simply a buying trend in open cannabis markets. I mean, pre-rolls weren’t always popular, and just because pre-rolls are popular in existing markets now, doesn’t mean they will remain popular in the future or even be popular at all in new markets.

After evaluating the sales data from the previous five years, we believe that the popularity of pre-rolls is more than a trend. We believe it so much that we can see pre-rolls overtaking flower as the dominant product category by 2030. Here is why!

Sales Data
When the first legal cannabis markets opened, pre-rolls were not good. It was labor intensive to make them, and many producers viewed pre-rolls as a place to dump their trim and shake. The result was a low-quality product at a premium price. It made sense why they weren’t popular with consumers.

However, we found that as markets matured, the popularity of pre-rolls increased. Let’s use Michigan as an example. After looking at pre-roll sales data from Headset, you can see that the price of pre-rolls skyrocketed when their recreational market opened at the end of 2019. As the market matured, the price declined, and sales rose until both eventually levelled out. You will also notice that, as the price of pre-rolls declined, more people started buying infused pre-rolls. This is great, but this is just one market. What about the others?

What’s interesting about the themes found in Michigan is that they are not limited to the Michigan market. If we look at the combined pre-roll sales data from Arizona, California, Colorado, Massachusetts, Michigan, Nevada, Oregon, and Washington, we get something that looks very similar to the one we have for Michigan. Prices start high, but, as prices lower over time, sales increase and infused pre-rolls take up a larger share of the pre-roll market.

Why Pre-Rolls are Growing so Fast
The decline in pre-roll prices played a big part in their rise in popularity with consumers. The two biggest factors that contributed to the decline in price were the falling price of flower as well as advances in pre-roll making machinery. The market price of flower is always going to impact the price of pre-rolls, but it was the introduction of better pre-roll making machinery that really helped solidify a lower price for pre-rolls.

As we mentioned in the previous section, when the cannabis industry first opened, making pre-rolls was labor intensive. So, even if bulk flower prices dropped, there would still be a noticeable price gap between a gram of flower and a one-gram pre-roll. Pre-roll making machinery gave producers the ability to create thousands of quality pre-rolls a day with only a few tabletop machines. This helped close the gap between flower and pre-roll prices and make them financially appealing to consumers.

This is especially true of infused pre-rolls. Yes, the price of concentrate will fall with bulk flower prices, but it was always labor intensive to make them. The concentrate either had to be mixed in with the flower material (making it more difficult to pack into a cone), rolled in by hand, or painted on the outside of each joint. Producers now have automated pre-roll infusion machines that can infuse hundreds of pre-rolls an hour, so they can keep the price low for the consumer.

Why You Should Make Pre-Rolls from the Jump
It’s easy to see why pre-rolls have become so popular, but why it takes a few months/years for the jump in popularity is still a bit of a mystery. Part of the reason for the delay might be that pre-rolls just aren’t being made a priority when markets open. It takes a lot to get a grow up and running. Getting the flower dialed in needs to happen before anything else, so maybe pre-rolls are being put into the growth phase of a company instead of the launch phase.

It will be interesting to see if the trend of delayed popularity continues, as the cannabis industry is now at a place where we have multi-state operators (MSOs). Experienced cannabis companies can move into a new market and hit the ground running. They have the SOPs to get their cultivation running, and they know the machines needed to make quality pre-rolls efficiently.

How to Make Pre-Rolls
The cool thing about pre-rolls is that you don’t need a huge production facility to create them. You can even source your material from other farms. It also doesn’t take a lot of space or expensive machinery to get started. For under $5,000, you can get all the tabletop pre-roll making machines you need to crank out thousands of pre-rolls a day.

The three machines you’ll want to invest in first are a grinder, a sifter, and a pre-roll filling machine. For your grinder, you are going to want one that can create a consistent particle size without damaging the trichomes. Sifting ensures a consistent particle size and that particles get removed that can damage the pre-roll. Lastly, a pre-roll filling machine does exactly what the name suggests. You’ll just want to know which accessories to get to meet your production needs.

With this simple setup, a single employee can crank out hundreds of pre-rolls every shift. It’s also incredibly easy to scale this production by adding a few more filling trays, pre-roll filling machines, and another employee.

Get Ahead of the Pre-Roll Surge
As you can see, it doesn’t take a lot to get pre-roll production moving, and, when you consider the incredible growth and market share that is made up by pre-rolled products, it’s hard to come up with a reason not to start production.

So, as you are making plans to launch your brand in a new market, remember that the pre-roll wave is either coming or already upon you. So be ready for it! For a more in-depth look at the pre-roll market, be sure to check out our State of the Pre-Roll White Paper, and, if you have any questions, the Pre-Roll Experts have you covered.