If you love pre-rolls, you should stock up on the mangle

Lovers of pre-rolls and self-made bags take note: According to several paper and bag manufacturers as well as supply chain managers, there is a threat of an international shortage of bags.

According to Alen Nguyen, CEO of MainStem’s supply chain management platform, the majority of cones around the world, regardless of which company ends up labeling them, are hand-assembled in “fewer than 10” factories in Indonesia. With a few exceptions, most of the rest is handmade in India.

Cigarette papers are generally mainly produced in factories in Europe, India and China, with the bulk coming from European countries such as Spain, France, the Czech Republic and other continental countries.

Regardless of where cones are made, Nguyen explained that a critical aspect of their manufacturing process – the actual construction – relies on human labor. The actual rolling paper manufacturing process is “fairly automated” and there are currently no wrinkles in this corner of the supply chain. But cones require careful assembly to maintain shape and structure without wrinkles, tears, or creases as the paper is rolled and glued. The process simply cannot be automated yet.

As the COVID era, this means that there have been plant closings and work stoppages, especially in Indonesia, since the beginning of the pandemic. This has resulted in a backlog in production and order fulfillment at a time when the demand for tenons has been increasing rapidly. Add to this a worldwide slowdown in shipping, and weed-filling cones are the latest victim of the current supply chain breakdown.

“Cones were invented around 20 to 30 years ago by this Dutchman who opened one of the first factories in Indonesia,” said Bryan Gerber, co-founder and CEO of Hemper, which also includes Hara Supply. Gerber called Hara “the largest manufacturer of pre-rolled cones in the world”. He explained that over time someone split off from the original factory and opened another and so on and so on, which has resulted in a large handful of factories producing cones that exist in Indonesia today.

Gerber, along with everyone else interviewed for this story, said Indonesia remains one of the major hubs for cones because the labor force is cheaper there. But strict union laws and previous work stoppages have inspired cone makers to look elsewhere in recent years.

In India, too, where Hara makes his cones, labor is cheap. According to Gerber, Hara production accounts for around 20 percent of the world’s cone supply. For manufacturers, India also has the advantage of being “basically open, COVID-wise,” said Gerber.

He added that there are no more pandemic downtimes, especially in factories. So while his company has no production backlog like those that rely on Indonesian labor, they are weathering shipping delays like the rest of the world. Technically, Gerber said, they could handle the overflow for cone suppliers interested in switching to Indian assembly, but they would all be paralyzed by the same shipping problems the rest of the world is facing.

Either way, this will result in a noticeable lack of cones, temporarily taking some brands off the market while things balance out. There will likely be price hikes for what makes it onto shelves as well, Nguyen said.

The demand for cones is highest

The shortage comes at a particularly difficult time for a market that is already under pressure. “The demand for cones is endless,” said Gerber. “Literally infinite.” Gerber says Hara currently produces 16 million cones per month, which he hopes will grow to 100 million cones per month by January. He bases this on the demand he has seen in the market, commenting by both himself and Nguyen that they are heavily controlled by multi-state operators.

Speaking on MainStem, Nguyen says the average order size increased 51 percent from 2019 to 2020. From 2020 to 2021, the average order size has so far increased by 43 percent compared to the previous year. This means that since the pandemic began, the average customer order size for MainStem’s wholesale buyers, who are companies that either pre-roll or sell cones under their own brands, has increased 116 percent.

The size of the market confirms this. According to a study by Custom Cones USA and Headset, a data company in the cannabis industry, pre-roll sales rose 59 percent from 2019 to 2020 – from $ 704 million to $ 1.12 billion. In 2020, pre-rolls accounted for 10 percent of total cannabis sales, up from 9.5 percent in 2019. Full data for 2021 is not yet available, but it is safe to say the market is growing steadily. Even if it stops growing in 2021, what already exists is big.

“Overall, in the past few months we have seen a two to three-fold multiplier for the production lead time and a at least three to five-fold multiplier for the shipping time by sea due to the security in the ports,” said Nguyen. “This takes place from the manufacturer’s dispatch to the distributors in the USA as well as to larger customers with whom we work directly with the manufacturers. This leads to product delivery between 13 and 18 weeks, ”he predicted. He added that all of this is subject to change, which means delivery times could also increase.

Several retailers – all of which sell either pre-rolled joints, cones, or both – all confirmed that they were facing delays and shortages of their own inventory due to problems with Indonesian cone production.

“The lack of paper and bags was a major factor in Blazy Susan’s growth over the past year. Many of the larger brands have struggled to keep up with demand due to the surge in port congestion and freight rates, ”said Will Breakell, CEO of Blazy Susan of Colorado.

Breakell also mentioned another factor that Gerber also confirmed: cigarette paper production problems in China, where some paper production has shifted over the years. Breakell said there had been “major” power shortages across the country, which meant that some regions could only produce two days a week or less.

Gerber said rising labor costs have made roll paper makers look further afield. Some papers made in China have also tested positive for heavy metals several times in the last few decades, which has also deterred manufacturers.

The CEOs of Space Coyote, Fuzzies, Daily High Club Greenlane and Snail also confirmed that they have encountered glitches in inventory due to the shortage of cones. MainStem’s Nguyen said he has multiple operator customers in multiple states who regularly place large orders and their shipments will be impacted.

Not every brand will have 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. Overall, there will be fewer cones for sale, period.

“Our team has heard that our competitors are having problems sourcing paper and assembling cones, which is causing inventory bottlenecks,” said Paul Marobella, President and Chief Marketing Officer, Republic Brands. The republic owns OCB, EZ Wider and Job. He said that Republic owns the entire supply chain, including papermaking and brochure assembly, and therefore will not see any bottlenecks in its brands of papers or bags.

Nick Kovacevich, CEO of Greenlane, which owns the Vibes brand of rolling paper, said there was also increased demand for paper products, including cones. Vibes’ papers are made in France, he said, reminding consumers. “Remember, this only affects pre-rolled bags, not flat paper, which still allows consumers to roll their own joints,” he said. “We can’t get enough cones, but we’re expanding production in two different regions to meet demand.”

Don’t know how to roll? It seems like there has never been a better time to study.