Pre-Rolls: Analyzing category performance & sales trends

Introduction

In a year when sales growth in the US is relatively flat, Pre-Rolls have managed to grow sales by over 13%. In Canada, the category has exploded to reach near parity with the king of categories, Flower. What has contributed to this massive trend, and where is it going? As always Headset has you covered in our latest Pre-Roll category deep dive.

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Methodology

Data for this report comes from real-time sales reporting by participating cannabis retailers via their point-of-sale systems, which are linked up with Headset’s business intelligence software. Headset’s data is very reliable, as it comes digitally direct from our partner retailers. However, the potential does exist for misreporting in the instance of duplicates, incorrectly classified products, inaccurate entry of products into point-of-sale systems, or even simple human error at the point of purchase. Thus, there is a slight margin of error to consider. In this report, we examine sales from US Headset Insights markets.  This includes AZ, CA, CO, IL, MA, MD, MI, NV, OR, and WA and unless otherwise mentioned considers data from January through August 2023.

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Key Takeaways

• Based on total sales, Pre-Rolls are the third largest product category in the US after Flower and Vapor Pens. In Canada, Pre-Rolls take the number two spot behind Flower sales.
• Pre-Roll sales grew 13.4% in the US, and 36.5% in Canada, vastly outperforming other cannabis product categories.
• In August of 2023, Pre-Rolls captured 15.3% of total cannabis sales in the US and a striking 33.3% of total sales in Canada.
• US brand count decreased 7.4% after peaking in 2022. However, developing markets such as IL and MD show that Pre-Rolls are underrepresented in their states compared to the national average. Thus, there are still opportunities in this growing category.
• Canada has seen monumental brand growth every year since 2020. So far, from 2022 to 2023, the market saw a 38.1% increase in the number of brands selling Pre-Rolls.
• The most popular segments for Pre-Rolls are by far ‘Hybrid - Single Strain’ and ‘Connoisseur / Infused’ which account for 67.4% of total sales in Canada and 80.8% in the US.
• ‘Connoisseur / Infused’ Pre-Rolls are one of the only segments growing their share of total sales in the category. This segment captures 42.3% of Pre-Roll sales in the US, and 32.6% in Canada.
• Demographic analysis shows that Pre-Rolls appeal to a lot of different groups, however, there is a slight preference among women in both the US and Canada.

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Sales Growth

Currently the second largest category in Canada and the third largest in the US, Pre-Rolls have exploded in popularity since the start of 2022. Comparing the first eight months of 2023 to the previous year, the Canadian market has seen Pre-Roll total sales increase by 36.5% and US sales have increased by 13.4%, outperforming other categories by a huge amount.

Customers in both countries more and more are choosing Pre-Roll products in their trips to the dispensary. In the US, Pre-Rolls capture 15.3% of total sales up 32% from 11.6% in January 2022. There is a broad variance in the popularity of the category across the US markets with MA (18.1%) and CA (16.8%) with the highest category representation. While IL (9.8%), CO (9.1%), MD (7.8%), and FL (5.3%) only capture single-digit market share.

Canada has seen an even more impressive spike in the popularity of the category. In August 2023 Pre-Rolls captured one-third of total sales. This is a 60.5% increase in market share for the category which was only 20.7% of total sales in January 2022. At the current rate, the category is rivaling the popularity of Flower in Canada. If the trend continues Pre-Rolls could dethrone classic Flower as the most popular cannabis format for the first time ever.

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Brand Count

When a particular product category gets hot we see brands rush into the space to meet consumer demand. In both Canada and the US this has been true the last several years.

Canada has seen double-digit year-over-year growth every year since 2020. Through August of 2020, AB, BC, ON, and SK registered a combined total of 95 Pre-Roll brands in market. By 2023 that number has risen 335% to 413 brands selling Pre-Rolls during the same period. The growth in this category has been massive in Canada. However, there are signs that it could be slowing. The year-over-year brand growth rate has decreased steadily each year with the 2023 growth rate at its lowest of 38.1%. Although, with double-digit growth in the 30s, there still seems to be an opportunity in this category.

The US has also seen strong brand count growth, though not as sharp as in Canada. Between 2020 and 2023 the number of brands selling Pre-Rolls increased 45% compared to Canada’s 335%. Between 2020 and 2021 US markets saw a 26.7% brand count increase followed by 23.2% the following year. However, in 2023 the year-over-year brand count through August dropped by 7.4%.

While it may seem that opportunity has plateaued for Pre-Rolls in the US that may not be the case. The drop in the number of brands in the category may just be a reflection of difficult market conditions in established US markets. While many companies are falling out of the category, Pre-Rolls are still outperforming the rest of the market when it comes to total sales growth. With the fragmented approach in the US where every market is on its own timeline, there are new markets presenting big opportunities for category growth. Our reports on developing markets like Illinois and Maryland indicate Pre-Rolls are currently underrepresented compared to the national market. That gap will likely close in the coming months and years.

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Top Segments

In both the US and Canada the most popular segments for Pre-Rolls are by far ‘Hybrid - Single Strain’ and ‘Connoisseur / Infused’. In the US, these two segments account for over 80% of total sales year to date while in Canada the group accounts for 67.4%. In Canada, single-strain Indica and Sativa each capture market share in the mid to low teens, however, single-strain Pre-Roll’s share of total sales is decreasing in both geographies.

In fact, the only segments that are showing growth in popularity are ‘Connoisseur / Infused’, and the much smaller ‘Mixed Strain’ segment. The ‘Connoisseur / Infused’ segment has grown steadily and now captures 32.6% of Pre-Roll sales in Canada and 42.3% in the US. Meanwhile, ‘Mixed Strain’ Pre-Rolls only capture 2%-3% of sales in both countries and are typically seen in variety multi-packs.

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Packaging

In Canada, Pre-Roll multipacks attract 82.9% of sales, vastly more than single (17.1%) Pre-Roll offerings. In the US it is close to an even fifty-fifty split between the two formats. However, the US and Canada are headed in opposite directions with a greater share going to ‘single’ offerings in Canada and ‘multipacks’ in the US.

There is also a difference in package sizes, likely tied to the differences in preferred formats outlined above. In the US, 1g joints capture 41.1% of total US sales while in the Canadian market, 1g only captures 14.6%. Instead, Canadian consumers gravitate towards items containing 1.5g (35.6%) followed by 3.5g (16.7%).

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Pricing

In Canada the equivalized quantity (EQ) price, or the price per gram is $8.98 while the average item price (AIP) for Pre-Rolls is $18.43. Canada’s affinity for multi-packs drives the average item price in comparison to US markets.

There is a lot of price variance within US markets compared to Canada. Since US state markets operate semi-independently and on various timelines, developing markets such as Maryland and Illinois have much higher prices than more mature markets like OR and WA. Washington state sees the lowest price per gram at $3.69, while Pre-Rolls in Illinois are over three times more expensive at $13.21 per gram.

In both countries, Pre-Roll prices are somewhat stable. While currently pricing compression is a known reality in our industry, Pre-Rolls have had the smallest change year-over-year to its price per gram in both the US in Canada. In the US, the Pre-Roll price per gram has dropped by 10%. This is compared to an average 19% reduction in EQ price across all other categories in the last year. In Canada, pricing compression has been a bit milder compared to their southern neighbor, however, Pre-Roll is the only category that has seen an EQ price increase (5.2%) through the first eight months of 2023 compared to the previous year.

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Demographics

This graph compares the proportion of total market sales by demographic group to the proportion of Pre-Roll sales attributed to each demographic group — the index below the graph compares these values. If the index for a demographic group is greater than 100, then that group spends relatively more on Pre-Rolls than they do on other product categories. If the index is lower than 100, then that group spends relatively less on Pre-Rolls compared to other product categories.

Pre-Rolls due to their familiarity and ease of use appeal to a broad age range as you can see from the index. Most demographics have an index that is close to the baseline of 100 which means the Pre-Roll category is not super sensitive to age or gender. In Canada, Gen X and Millennial Women in particular show a preference towards Pre-Rolls.

Much like in Canada, Pre-Roll consumption in the US looks a lot like the national average across all categories. However, The US does share the feminine fondness reflected in the Canadian market with the addition of Gen Z women.

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Conclusion

Pre-rolls have achieved massive success in the last year and a half, making it the third most popular cannabis product type in the US and second most popular in Canada. This category has a lot of things going for it including it’s broad appeal and the rise of more ‘Connoisseur / Infused’ products. Pricing in the category is competitive and has remained relatively stable amidst widespread pricing compression. Even after a sustained period of strong growth, there is still a lot of opportunity for this category to continue to grow, and as always Headset is here to deliver those insights.