The Canadian cannabis market has been through a period of hyperextension since legalization, and for the first time in its history, the industry has seen a drop in revenue, according to a market report by Custom Cones USA. Despite this decline, certain product categories have shown resilience and growth, with pre-rolls and vape products gaining market share while traditional flower sales continue to slide. "This shift reflects a broader trend toward more convenient cannabis products," says James Valentine from Custom Cones USA.
© Custome Cones USAJames Valentine, Custom Cones USA
Flowers down, pre-rolls up
Flower sales once dominated the market, holding a 45% share in 2022, but that figure had dropped to 35% by mid-2023. The decline continued into the summer months, when pre-rolls officially surpassed flower in market share. "This change highlights a clear consumer preference shift away from raw cannabis flower and toward more convenient, ready-to-use products," James points out.
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According to him, infused pre-rolls have played a significant role in this transformation. With many producers finding themselves oversupplied with raw flower, infused pre-rolls have provided an effective way to repurpose surplus inventory. "As a result, nearly 23 out of 50 the top-selling pre-roll products in Canada are now infused," he points out.
Market evolution
In any emerging cannabis market, raw flower tends to be the first product to reach mass production. Over time, however, more sophisticated product categories develop. "The regulations were passed in October 2019, but there was a two year delay before infused products hit dispensary shelves, during which time the agency clarified rules allowing their production," James remarks. Since then, sales have skyrocketed, with consumer demand shifting toward multi-pack infused pre-rolls over single one-gram pre-rolls.
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The data supports this trend. In fact, for 6 months from May to October 2024, Pre-Rolls led Flower in market share, outselling Flower by $33 million during the warm months, peaking in July '24 with a 3% lead in sales, the report shows. However, seasonality appears to affect Pre Roll sales as the average category market share in the warmer months, April - September, was 34% while the colder months of October - March averaged 31.7% market share.
Price compression?
The addition of cannabis concentrates is an allure for consumers, as the primary factor when choosing a Pre Roll product is potency, followed closely by cost. In Canada, pre-roll prices began plateauing in early 2023, with the average equalized price, or the price per gram, hovering around $9.06 before beginning a gradual decline in mid-May. By 2024, the average price had dropped to $8.48, marking a 5% year-over-year decrease and the lowest average equalized price since Q2 2022.
In contrast, pre-roll pricing in the U.S. varies significantly, with the average pre-roll product costing roughly half the price of its Canadian counterpart. "The primary reason for this discrepancy is the Canadian consumer's preference for multi-packs, which command a higher price point," James explains. Multi-packs account for 85% of the Canadian pre-roll market, whereas in the U.S., they make up only 50% of total pre-roll sales.
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From raw flowers to more consumer-friendly products
Market data from 2024 shows that infused pre-rolls and hybrids are driving sales. Among the top 50 pre-roll products of the year, 23 were infused, up from 18 in 2023. Hybrid products also saw growth, with 17 making the top 50, while sativa pre-rolls dropped dramatically, now accounting for just five of the top-selling products.
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"Jeeter, a U.S.-based brand with just over a year in the Canadian market, has already secured four of the top 50 best-selling pre-roll products," James comments. Their Mini Baby Jeeter 0.5-Gram Infused Pre-Roll 5-Packs ranked fourth in sales, second only to General Assembly's Tiger Blood Distillate Infused Pre-Roll 3 Pack.
The pre-roll consumer
Males continue to dominate cannabis purchases, making up nearly two-thirds of the consumer base. However, this gender gap varies by generation, with younger consumers having a higher percentage of male buyers. Millennials are the largest cannabis-consuming generation, accounting for 45% of the market, followed by Gen Z at 28% and Gen X at 19%.
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Generational preferences align closely across genders, with hybrids leading the market by an average of 8%. Female consumers tend to purchase fewer infused pre-rolls than men by a margin of 2.5%. "Overall, hybrids and infused products dominate sales across all demographics," James says.
James believes that the continued success of pre-rolls, particularly infused multi-packs, suggests that this category will maintain its dominance moving forward. "Multi-packs have nearly swept the top 50 best-selling pre-roll products, and with higher-priced packs leading the way, revenue growth in this sector appears sustainable," he points out.
"As the market matures, consumer preferences will continue to evolve. However, the data indicates that pre-rolls, especially infused and hybrid varieties, are well-positioned to remain the top-performing cannabis product in Canada well into 2025 and beyond," he concludes.
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