If You Love Pre-rolls, Stock Up Ahead of the Shortage News by admin - October 29, 2021October 29, 20210 According to various cone producers and managers in the supply chain, a shortage is likely worldwide for those who like pre-rolls or stuff-yourself cones. According to Alen Nguyen, CEO of supply chain management platform MainStem, the majority of the world’s cones, regardless of what company ends up sticking their labels on them, are assembled by hand in “less than 10” factories in Indonesia. With a handful of exceptions, the rest of them are made in India. The vast majority of rolling papers come from Europe and India. Regardless of where cones are produced, Nguyen explained that a crucial aspect of their manufacturing process—the actual construction—relies on human labor. The actual rolling paper production process is “pretty automated,” and there are currently no wrinkles in that corner of the supply chain. However, cones need to be carefully assembled in order to keep their shape. The process simply hasn’t been able to be automated yet. This is the COVID era. It means there has been a lot of factory closures in Indonesia since the outbreak. The result has been a delay in order processing and production, at a moment when cone demand has increased rapidly. Cones used for weed stuffing were the latest victim of the global shipping slowdown. “Cones were invented about 20 to 30 years ago by this Dutch guy who opened one of the first facilities in Indonesia,” said Bryan Gerber, co-founder and CEO of Hemper, which also owns Hara Supply. Gerber called Hara “the largest pre-rolled cone manufacturer in the world.” He explained that, over time, someone from the original factory split off and opened another, and so on and so forth, which has resulted in the large handful of factories making cones that now exist in Indonesia. Gerber said, as did everyone interviewed, that Indonesia continues to be a major hub for cones, because the labor cost there is lower. Cone manufacturers have been forced to move elsewhere by strict unionization laws, as well previous labor stoppages. Labor is also inexpensive in India, where Hara constructs its cones—Gerber says that Hara’s output accounts for about 20 percent of the world’s cone supply. For manufacturers, India also has the benefit of “basically being open, COVID-wise,” Gerber said. He said that there aren’t any pandemic-related factory shutdowns anymore. His company doesn’t have a production backlog like companies that depend on Indonesian labor. But they do experience shipping delays. Gerber claimed that while they could manage overflow from cone suppliers looking to switch to Indian assembly but would still be left behind by the same shipping issues the rest of world faces. Either way it’s sliced, this will result in a noticeable shortage of cones, which will see some brands temporarily removed from the market while things level out. Nguyen also stated that it is likely there to be price hikes for the products that do make it on shelves. The highest demand for cones is in the United States This shortage occurs at an especially difficult time in a market already under pressure. “The demand for cones is infinite,” Gerber said. “Literally infinite.” Gerber says Hara is currently producing 16 million cones a month, which he hopes will increase to 100 million cones a month by January. Nguyen also commented that the markets are heavily multi-state-operated. Gerber bases his decision on the demands he has observed. Nguyen, speaking about MainStem, says there has been a 51% increase in the average order size from 2020 to 2019. The average order size has increased by 43 percent from last year to 2020-2021. This means that, since the pandemic started, average customer order size is up 116 percent for MainStem’s wholesale shoppers, who are the companies that either stuff pre-rolls or sell cones under their own brands. It is obvious from the market’s size. According to a study performed by Custom Cones USA and Headset, a cannabis industry data company, from 2019 to 2020, pre-roll sales grew 59 percent—from $704 million to $1.12 billion. Pre-rolls represented 10% of all cannabis sales for 2020. That’s up from 9.5% in 2019. Full 2021 data isn’t available yet, but it’s safe to say the market is steadily growing. Even if 2021 doesn’t see more growth, what already exists is big. “Overall, we’re experiencing a two to three multiplier on manufacturing lead time in the last couple of months and at least three to five multiplier on shipping time by sea due to the back up at the ports,” Nguyen said. “This is from the manufacturer shipping to the distributors in the U.S., as well as larger clients with which we work directly with the manufacturers. This results in anywhere between 13-18 weeks for product delivery,” he predicted. This is subject to change so delivery times may increase. Several retailers—all of whom sell either pre-rolled joints, cones or both—all confirmed they were battling delays and shortages of their own stock as a result of the problems with Indonesian cone production. “The paper and cone shortage has been a major factor in Blazy Susan’s growth over the last year. Many of the larger brands have had trouble keeping up with demand thanks to huge increases in port congestion and shipping rates,” said Colorado-based Blazy Susan CEO Will Breakell. Breakell also spoke out about another problem, which Gerber also acknowledged: China has experienced production issues with rolling papers. This is where some paper production has moved over the years. Breakell said “major” power shortages have been happening across the country, resulting in some regions only being able to produce two days a week or less. Gerber stated that increasing labor costs has prompted rolling paper companies look beyond the United States. Several papers made in China also have been found to contain heavy metals, and this has scared some manufacturers. Space Coyote CEOs Fuzzies, Daily High Club Greenlane, Snail and Space Coyote also stated that there has been disruption in stock due to cone shortages. MainStem CEO Nguyen said that there are many multi-state operators clients that place large orders and their supply may be disrupted. Not every brand will see a shortage, per se, but even individual brands with more solid supply chains won’t be able to make up the difference with their own inventory. There will be less cones available for purchase overall. “Our team has heard our competitors are having issues sourcing paper and assembling cones, thereby causing inventory shortages on their end,” Paul Marobella, president and chief marketing officer at Republic Brands, said. Republic is the owner of E-Z Wider and OCB. Republic has its whole supply chain (including paper manufacturing and booklet assembly) and will therefore not experience any shortages of either cones or papers. Greenlane’s CEO Nick Kovacevich stated that there is an increased demand for their rolling paper brand Vibes. Vibes’ papers are made in France, he said, and he offered consumers a reminder. “Keep in mind this will only affect pre-rolled cones and not flat paper which still allows consumers to roll their own joints,” he said. “We cannot get enough cones, but we are expanding production in two different regions to meet demand.” Don’t know how to roll? It seems like there’s never been a better time to learn. Share on Facebook Share Share on TwitterTweet Share on Pinterest Share Share on LinkedIn Share Share on Digg Share