A new report from Headset has found that Americans aren’t as into pre-rolls as Canadian consumers. Between August 2020 and August 2021, the market share of pre-rolls in Canada averaged 18.6%, while in the US, the market share of pre-rolls only averaged 9.5%. The only exception it seems is the Massachusetts market. Apparently, they really like pre-rolls in that state.
- Firstly, Pre–Rolls were one of the few product formats that have been available since the beginning of Canada’s cannabis market. A regulation change, dubbed ‘Cannabis 2.0’, allowed previously-prohibited product formats (such as vapor pens, edibles, and concentrates) to be sold in Canadian cannabis retailers at the beginning of 2020 – more than a year after the market originally launched. Most product categories that were introduced in ‘Cannabis 2.0’ still have significantly lower market shares in Canada than in the US. For example, over the previous 90 days, edibles made up about 11% of sales in the US, but only 5% of sales in Canada.
- Secondly, Canadian Pre-Roll products tend to be larger. By that, I mean that there tends to be more total cannabis in a single Canadian pre-roll product than in a US pre-roll product. For example, over the previous 90 days the highest volume package size of pre-roll in the US was 1g, but 1.5g in Canada. A tendency towards larger package sizes unsurprisingly pushes up the average price of these products as well. Eg. Over the previous 90 days the average price of a pre-roll product was about $11 in the US and about $18 in Canada. That difference in size and price could cause consumers to think of a pre-roll more as a primary purchase, rather than a low-cost add-on item.
When Americans want to buy pre-rolls, they typically choose the connoisseur/infused segment, which makes up 32.4% of sales. Canadians aren’t as picky and this same segment makes up only 0.1% of sales. Pricing is a possible reason for the large difference in Connoisseur/Infused market share between the two countries. In Canada, they are priced 57% higher than the average item price of the other segments, while in the US they are priced only 18% higher than the other segments.
However, pricing might not be the only reason that Americans are choosing the infused joints. Andrew DeAngelo, Cannabis Industry Consultant, and Strategic Advisor said, “The quality of legal cannabis in the U.S is better in full flower form not in pre-roll form motivating consumers to roll their own rather than getting a subpar pre-roll.”
Scott Grossman, Vice President of Corporate Development at Turning Point Brands (NASDAQ: TPB) (maker of ZigZag rolling papers) agrees with DeAngelo on the perceived quality of cannabis in pre-rolls. He said, “In the U.S., the old pre-rolls were historically viewed as a lower quality flower which may have capped sales—in addition, these items are typically additions to the basket versus the main intent of purchase.” Grossman thinks that Americans prefer to roll their own so that they can control the quality of the product. Despite that, he thinks the perception is slowly changing.
“Companies like Old Pal, Space Coyote, etc. have innovated to create shareable pre-roll packs which make a lot of sense, especially during the pandemic—no one wants to pass around a single joint,” said Grossman.”Nearly 30% of the U.S. pre-roll market is driven by infused pre-rolls—ie. flower either dipped in Kief, but more recently, pre-rolls with hash concentrates within (a better form factor).”
More companies are producing mini-pre-roll packages so that people can have the social aspect of smoking joints together but without the passing around of a joint. The smaller size also means fewer unsmoked joints that the consumer now has to store without it falling apart or making a mess. For example, Green Thumb Industries (OTC: GTBIF) sells a package of five mini-pre-rolls called Dogwalkers. The idea is that the little joint is small enough to be enjoyed walking one’s dog.
Cones could be another reason why Americans are rolling their own versus buying pre-rolls. The innovation of selling a cone-shaped empty joint with a small plunger to tamp down dry herb can turn those without joint-rolling skills into a master. Grossman said, “Without question for the consumer. Not only does it make it easier to roll, but new innovation at the cultivation/manufacturing facilities allows the production of pre-rolls at scale (which, to be clear, is still much more labor-intensive than tubes). In addition, a conical joint versus a straight tube/joint actually makes the burn better due to the “Venturi Effect” — because there’s more material on top, it produces a more consistent flavor because you’re burning more in the beginning (and less in the end). This creates less resin and because of increased pressure, it tends to burn smoother. Punchline—a more concentrated hit. Cones also tend to produce less waste (because there is less material near the tip).”
Joint burning performance is also a key issue for these consumers. DeAngelo said that rolling joints at home avoids the joint running problem (burning unevenly) associated with almost all store-bought joints in the US. “A joint that is stuffed by a machine runs like crazy compared to a joint rolled by hand. The way the fibers intertwine works better with a hand roll so the joint burns evenly. Americans are more sensitive to this perhaps. I know I am.”
More Pre-Roll Differences
Headset also determined in its report that market shares of the Indica and Sativa Single Strain segments in Canada were more than double the size of their market share in the U.S. where Hybrid – Single Strain has more category share than Indica and Sativa combined. “We also find that the Cannagars/Blunts segment owned 4.2% of the Pre-Roll market in the US, while it only held 0.1% within Canada.
While Americans haven’t been big buyers of pre-rolls to date, that could be changing. It seems companies have learned that tossing the crummy trim into a pre-roll isn’t going to sell. Social media accounts have shown various people buying these pre-rolls and then unwrapping them on camera to expose the insides. That exposure may have turned the tide on poor-quality pre-rolls. As consumers spread the word of an improved product, sales are likely to grow and could make this an improving category.