We are a full two years into the COVID-19 Pandemic, which was announced in March 2020. With the start of the pandemic, we saw a lot of uncertainty as the daunting aspect of quarantine loomed over us. Many weren’t sure if stores would remain open, and which ones would remain open. Many people panic-purchased goods in bulk such as toilet paper, groceries, alcohol – and cannabis. Thankfully, essential businesses stayed open, and the list of essential businesses included liquor stores and cannabis dispensaries.

2020 saw the highest legal cannabis sales the world had ever seen – with Canada newly legalized, and more states voting to legalize each year, consumers flocked to dispensaries as the pandemic raged through the world. By the week of March 16, 2020, cannabis sales in the US were already 38% higher than the first full week of January, according to cannabis data firm Headset. In Canada, sales were 36.6% higher that week than in the first full week of January.

As quarantine dragged on, consumers kept smoking more weed and cannabis sales continued to increase in both the US and Canada.

Puff, puff, pass has always been a huge part of stoner culture – but with the pandemic, people may be less inclined to share a joint with a group of friends. Additionally, the pandemic has brought an onslaught of additional challenges – with the seemingly never-ending supply issues, shortages of plastic and employees, and the increasing gas prices to deliver the finished product, there are plenty of speedbumps in the pre-roll industry to get it from farm to shelf.

So here at Custom Cones USA, we wanted to know – while it’s obvious that cannabis sales increased overall during the pandemic, what has COVID done to pre-roll sales in specific? How have supply chain issues affected both cannabis businesses and cannabis consumers? And more importantly, why and how will these supply chain issues be resolved over the months ahead?

Supply Chain Issues

The pandemic has posed several significant challenges for global supply chains. National lockdowns have slowed the production of materials and goods, disrupting the flow of many supply chains in every sector of the production world. Companies were unprepared for the pandemic and the hurdles caused by lockdowns, worker reductions, vaccine mandates, and other COVID-19 precautions. >

• The initial lockdowns in China in 2020 shuttered factories and stalled global shipping with a lack of production.
• On the other side of the world, lockdowns in the US prompted a huge surge in demand as people ordered products and electronics to facilitate working from home, as well as the spike of interest in hobbies to keep cabin fever at bay while in quarantine.
• Additionally, the Brexit customs that impact the plastics industry effect every other industry doing trade through the EU and UK. The delays caused by customs checks and paperwork due to Brexit slow down the process and create congestion at ports.
• Stateside, a shortage of truckers in the US to offload goods arriving at ports is causing abnormally long wait times at the ports, with lines of ships anchored of the coast while they await space to dock. The chaos at the docks has caused a 300% year-on-year increase in seaborne freight costs.

With 80% of the world’s goods trade transported by sea, freight-cost surges are causing concerns in global markets already bracing for accelerating inflation. Many businesses are being forced to pay much higher shipping prices to transport goods – and as the cost of transporting goods is part of every step of the supply chain, the impact of these increased costs has reverberated throughout the economy.

These supply chain disruptions impact every purchasable good in the world, delaying the delivery of raw materials and finished products, as well as putting a strain on the ability of many brands to keep enough supply on hand to meet the high demand of many products.

Katrina McKinley, CEO of Phat Panda, the largest cannabis grower in Washington State, reported a shortage of their custom branded RAW Cones, which feature the RAW logo on one side and the classic Phat Panda logo on the other. While being shorthanded on custom cones, McKinley says they were able to keep up with the demand by falling back on their non-branded cones.

Another option to make sure you have enough supply in your backstock inventory is with our designer cones! These cones add a pop of color to make your brand stand out on the shelf, and they are available in several stock colors and paper options.

Plastic

The most popular way to package pre-rolls is with the classic plastic pop-top tube. It’s no secret that the pandemic has increased the demand for plastic packaging materials while plastic production shutdowns and supply chain hiccups have driven the supply of available plastic down, resulting in a catastrophic spike in the price of plastic goods – including a rise in price for the ever-popular doob tube.

Polyethylene is a polymer used primarily for packaging like plastic bags, films, and shrink wraps. North America’s favorite pop-top doob tubes are made from polypropylene, a thermoplastic polymer usually used for harder plastics.

In January 2021, polypropylene prices rose from 13.5 cents to 96.5 cents per pound – over seven times the original cost before the pandemic.

“I don’t see the [plastic price increases] ending anytime soon…We are going to keep seeing them happen as the resin crisis continues.” -Bailey Heishman, ePlastics

Let’s take a deeper look at all of the factors in play.

Hurricane Laura

In the summer of 2020, while the demand for plastic was spiking due to the increased need for PPE in the pandemic, Hurricane Laura impacted many big Gil Coast polymer producers.Extreme weather conditions forced several producers to suspend production – almost overnight, 15% of the American polyethylene (PE) and polypropylene (PP) production ground to a halt.

The delay in production meant scarce inventory of highly sought-after PE and PP supplies, including for North America’s favorite pop-top pre-roll tubes. Experts estimated it would take months for Texas production to recover from storm-caused imbalances and get back to regular operations.

Gulf Coast Freeze

In February 2021, three severe winter storms swept across the United States, bringing snow, sleet, and freezing rain to a very unprepared Texas.

While the Gulf Coast plastics industry was still recovering from the impact of Hurricane Laura, these winter storms decimated them further. Power outages from a nearly collapsed power grid halted production once again. Polypropylene production in the US decreased by 12%.

Suez Canal Fiasco

On March 23rd, 2021, a massive cargo ship the size of the Empire State Building, a container vessel named the Ever Given, became stuck in the Suez Canal. The Suez Canal is a vital international shipping passage, one of the busiest in the world, and the week-long blockage dealt another blow to the global plastic industry’s supply chain.

The total trade loss caused by this blockage has been estimated to be roughly $54 billion – based on only the cargo shipments that were halted or delayed due to the grounding of the Ever Given.

International Trade Conditions

• The recent spike in shipping costs from Asia reduced the plastic materials entering the US.
• Plastic exports to South America added more strain to the already-limited US supply.
• Brexit customs shifted, negatively impacting the global plastic supply chain due to the port congestion between the EU and the UK thanks to Brexit-related customs checks and additional paperwork. This resulted in significant delays in PE and PP exports to the US.

Product Shortages

Plastics weren’t the only industry impacted by the need for PPE and other COVID-related shortages.

At the start of the pandemic, label companies were overwhelmed with making sanitizer labels. Because of this, labels were hard to order – which was especially hard on the cannabis industry due to the compliance regulations surrounding labels and what needs to go on them. Thankfully, this specific issue has been resolved by the time of writing this blog post.

Isopropyl alcohol became nearly impossible to find because it was needed to make hand sanitizer. As a result, prices increased, and stock levels became incredibly low. Cannabis companies rely on isopropyl alcohol for cleaning, as well as for certain extraction methods, and this impacted them greatly.

Labor Shortages

Quarantine lockdowns diminished the ability of factories to maintain inventory levels. Sanitary measures, worker reductions, vaccine mandates, and other COVID-19 precautions reduced production all over the country significantly, causing yet another shortage of PE and PP inventory.

Many Americans exited the workforce due to COVID concerns, childcare needs, and other factors. Not to mention the nearly 1 million deaths due to COVID in the United States on top of the annual employees leaving the workforce for retirement and other natural shifts.

Social distancing and mask mandates limited the number of people allowed in a building or room. This made it difficult for processors to have all of their employees working in small production rooms. While working remotely became a popular solution for many other industries, cannabis producers did not have that luxury and were forced to work around the limitations. In addition to employees calling out sick and the overall impact of COVID outbreaks, producers were struggling to meet to demand.

On top of these hurdles, the cannabis industry has proven to have a high turnover rate to begin with. Companies are reporting large numbers of openings available and struggling with low employee retention rates.

And these problems aren’t unique to the cannabis industry! As a whole, recent data suggests that fewer than 65% of employees in every industry plan to stay with their employer for the entire duration of 2022.

Smaller Profit Margins

As plastic packaging prices increased, gas prices increased, and production struggled to keep up with the demand, something strange has happened – these costs have not been passed on to the consumer. The average price of a pre-roll has not increased during the pandemic!

Despite the increased demand for cannabis, consumers are seemingly getting even more price-conscious, resulting in a fiercely competitive market.

“We haven't adjusted our prices to pass those costs onto consumers yet. Given the price sensitivity of consumers right now, we’re doing everything we can to deliver quality through increased efficiencies. At some point, though, the markets and inflation may have to correct.” -Alex Bernson, Solstice, Washington State

While this is good news for the buyer, unfortunately this means that cannabis companies are experiencing smaller profit margins than they were before the pandemic. This poses problems as staff is requesting higher-than-ever wages, pricing for facilities and warehouse space continues to increase, and the price of packaging continues to go up.

Is it Over? What to Expect in 2022

Although many states are lifting their mask mandates and many have already returned to work in the office, don’t be fooled – the negative impacts COVID has had on the supply chain are far from over.

Empty store shelves have already plagued communities all over the US in 2022 so far, and businesses are anticipating worsening supply chain issues in the months to come. Between the gas prices continuing to rise, truckers going on strike, and a nationwide glass shortage, the cannabis industry will continue to feel the impact. Will the consumer start to feel the impact at the dispensary level as well?

Pre-Roll Market Share

According to survey data collected by the team here at Custom Cones USA, pre-rolls are the number one most popular smoking method. Among the stoners we surveyed, pre-rolls were preferred over bongs, pipes, dabs, and vapes.

Our survey participants reported an increase in pre-roll use since the start of the pandemic. Many stated that their cannabis use as a whole increased with the pandemic due to being stuck at home, and pre-rolls provide the easiest way to smoke.

In the US, pre-rolls have statistically accounted for 8-10% of the market. The start of the pandemic saw a slight decrease in pre-roll sales – Between March and May of 2020, it decreased to the lowest it’s ever been, at 7.5%. However, as the pandemic has gone on the numbers have increased to an all-time high at 10.9% in August of 2021.

The pre-roll market share in Canada is much higher than their southern stately neighbors. Between August 2020 and August 2021, the monthly market share of pre-rolls in Canada averaged 18.6% and have steadily increased over the course of the pandemic.

Single Pre-Rolls vs Multi-Packs

As the pandemic spread, fewer people were keen on the idea of puff, puff, passing with their friend group. And since the start of the pandemic, multi-pack sales have skyrocketed! In 2021, multi-packs accounted for 79% of all pre-rolls purchased in Canada.

On the other hand, the multi-pack sales in the US accounted for only 25% of pre-rolls purchased on average in the US. This is an increase from previous years, but not nearly as high as in Canada.

“Share of Multi-Pack Pre-Rolls within the US had a range of 40% in 2021. Colorado, Michigan, and Nevada had the lowest shares in the US, around 20%. Shares in these markets could be lower because Colorado and Nevada are considered more tourist destinations, and Michigan is a younger market. California (56%), Oregon (48%), and Washington (45%) have the highest share of Multi-Packs and are also all mature markets. This may indicate that consumers in these markets are veteran customers that know what they want in a Pre-Roll and are more likely to purchase Multi-Packs over singles than in younger markets.” -Headset Multi-Pack Report, Feb. 2022

The CCU survey group prefers multi-packs to single pre-rolls, with 63.6% of participants opting for a multi-pack. One participant noted a preference for multi-packs because they often offer smaller joints that are easier to smoke alone. Another said that multi-packs make it easier to share a sesh with friends without having to share a joint.

Although restrictions are being lifted in many parts of the country, multi-packs are likely to continue to grow in popularity as each cannabis market matures.

Gas Prices

Because cannabis is still federally illegal, it is not able to be mailed or shipped. As a result, cannabis companies are forced to deliver their products through in-house delivery vans or small, independent transport companies. And because of this, gas prices have a direct impact on cannabis companies and their ability to deliver product to dispensary shelves.

At the start of the pandemic, quarantine caused a lot of people to drive a lot less. This, in turn, drove gas prices down. A consequence of these price drops was a collapse of production – production was cut and tens of thousands of workers were laid off.

Once the cabin fever hit and people started leaving their homes in droves, the demand for gas spiked. With an imbalance of supply and demand, prices spiked as well.

By November 2021, gas was 58.7% more expensive than in November 2020. In 2020, gas was, on average in the US, $2.20. In November 2021, that average reached $3.49.

The war in Ukraine has impacted the price of gas now in 2022, as Russia is one of the top oil exporters in the world. As of March 22, 2022, gas soared to a new average of $4.24 per gallon in the US.

The increase of gas prices has increased the cost to deliver goods from growers to dispensaries, as well as the delivery of any other goods required to run a successful business.

Truckers on Strike

Already-existing supply chain issues were exasperated by truckers going on strike in the US and Canada.

The protests began in Canada in February 2022. Truckers went on strike to protest COVID vaccine mandates, and they began a “Freedom Convoy” that involved hundreds of large transport trucks blocking the streets surrounding Parliament for nearly a month, in addition to blocking one of the busiest border crossings between Canada and the United States.

The city of Ottawa was forced to declare a state of emergency due to the trucker protests and the safety risks posed to the residents.

Inspired by the Canadian Freedom Convoy, American truckers began a strike and a “People’s Convoy” to protest the vaccine mandates in the US. Their goal was to “jumpstart the economy” and re-open the country.

The People’s Convoy made it 4000 miles to Washington DC and protested for three weeks. However, the protest failed to accomplish any of its desired changes and the people involved returned to their local communities.

Blockages that prolonged and prevented trade between the US and Canada increased tensions and slowed the supply chain even more. And while these protests may be over, the bottle-necks caused by the backup is still impacting the supply chain, resulting in increased shipping prices that are then causing increased product prices for goods, including many packaging options for many industries, including the cannabis industry.

Glass Shortage

Back in the 90’s, many glass manufacturersmoved overseas – China, Mexico, and India are the top three countries that export glass to the US now. And while there is no shortage of material and no shortage of glass itself, freight issues and rising shipping costs battling with increased demands have drastically increased the price of container glass. Many companies are now paying higher prices for smaller shipping containers, so less glass is being imported into the US, and it costs a lot more to get it here.

The numbers tell all – import air cargo rates rose 80% from January 2020 to January 2022. Freight brokerage rose by 45% in that time frame. Truckload transportation increased by 25%, and parcel rates rose 14.7%.

All of these increased prices are being passed on to the purchasers of the glass being transported, and this supply chain issue isn’t expected to end any time soon.

How to Maneuver the Glass Shortage

Many businesses are finding alternative replacements for glass or finding other creative ways to beef up their supply chain. These workarounds are necessary, as freight and supply chain issues are not expected to resolve until at least 2023.

Alternative Materials

If your brand is looking for an alternative to glass tubes, Custom Cones USA has a line of tubes that would be a great fit for you. Our Super Seal Pre-Roll Tubes are made from polystyrene – a brittle plastic that resembles the look and feel of glass. Additionally, they are child-resistant, temper-evident, and available in multiple colors and sizes. Choose from 120mm, 113mm, or 100mm, and then decide if you want clear, transparent amber, transparent black, opaque black, or opaque white.

Go Circular - Reduce, Reuse, Recycle

Another talked-of solution is for companies to offer a trade-in program for their glass containers. We’ve seen milk companies do it for years – the consumer pays a bottle deposit at the grocery store, and when they’ve finished off the contents of the bottle, they bring it back and are refunded the bottle deposit.

Some brands are already attempting something similar. Cannachange is a new brand completely dedicated to the sustainability of cannabis packaging. Their multi-state recycling program partners with dispensaries to host recycle bins for customers to drop their old doob tubes and jars in exchange for points that can be redeemed for products at the dispensary.

Canna West Seattle has a program called Canna Collect. Across the street from the dispensary is their sister store, The Culture Shop. The Culture Shop houses a recycling drop and rewards program for using it, in addition to their products and CBD care items for sale.

Stock Up

The best way to make sure you have enough glass on hand when you need it is to stock up on it. Place larger orders and keep up to date on your inventory so you know when to order more before it’s too late.

While the increase in glass prices may make this hard for some brands, Custom Cones USA is doing what we can to relieve the burden. We offer tiered discounts – the higher quantity you purchase, the less you will pay per unit. These tiered discounts are available for all of our wholesale products, from pre-rolled cones and blunts to packaging options like glass tubes, super seal tubes, and classic doob tubes.

In Conclusion