For years, flower was the foundation of the cannabis industry. It headlined dispensary shelves, consumer demand and revenue conversations across nearly every legal market. But in 2025, the industry reached a turning point.
According to the 2026 State of the Pre-Roll Market Report by Custom Cones USA, pre-rolls overtook flower in unit sales for the first time in history, becoming the top-selling cannabis product on the market by volume. Pre-roll revenue rose 9.8% year-over-year to nearly $3.6 billion, while unit sales jumped 18.6% to 383.2 million units sold.
It was a milestone moment for one of cannabis’ fastest-rising categories, but beneath the growth headlines is a more complicated reality.
Even as pre-rolls win market share and outsell flower, brands across the category are dealing with falling prices, tighter margins and an increasingly competitive environment. In many ways, pre-rolls are becoming the biggest success story in cannabis at the same time they are becoming one of its toughest businesses.
One of the clearest signals in the report is pricing pressure. The average pre-roll price dropped to $9.31 in 2025, down 6.6% year-over-year from $9.97 in 2024, with prices now down nearly 20% from the 2022 peak of $11.70.
That decline reflects a trend seen across the industry: as markets mature, supply increases, competition intensifies and pricing becomes more aggressive.
For consumers, lower prices can be welcome news, but for brands and operators, they can create serious challenges.
When prices fall faster than production, labor, packaging, compliance and distribution costs, profitability gets squeezed quickly.
More Brands, More Competition
The report found 3,242 brands offered pre-roll products in 2025, an increase of only 72 from the prior year, and while that sounds stable, the underlying numbers tell a different story.
A total of 589 brands active in 2024 were no longer active in 2025, while 661 new brands entered the market. That churn suggests a category where brands are constantly entering, exiting, merging or being pushed out. In practical terms, shelf space is crowded, customer loyalty is contested and many operators are fighting for survival.
This is common in maturing consumer packaged goods markets, but cannabis adds extra complexity through taxes, regulation, fragmented state markets and licensing restrictions.
The Race to the Bottom Is a Real Fear
When producers themselves were asked about threats to the category, the most common concern was not changing tastes or competition from vapes, it was oversupply.
According to the report, 52.8% of operators said oversupply and the “race to the bottom” on pricing is the biggest threat to pre-rolls, while another 18.1% cited regulations and testing burdens.
That language matters. A race to the bottom happens when brands compete primarily on price, forcing repeated discounting until margins become unsustainable, and once that dynamic starts, it can be difficult to reverse.
Lower prices may move more units in the short term, but they can also weaken brands, reduce product quality and limit innovation over time.
The report found pre-rolls averaged a 46.6% gross margin, ranking third among major cannabis categories behind edibles and vape pens. Higher-performing operators may maintain strong margins through scale, sourcing, automation or vertical integration, while smaller independent brands may struggle significantly more.
The report also highlighted a major gap between house brands and outside brands. While House Brands averaged 55% margins, non-house brands averaged 46.2% margins, giving vertically integrated operators a built-in advantage. They can manufacture internally, place products directly into their own stores and avoid middleman costs, while independent brands competing for shelf placement often do not have that luxury.
See also: Getting Cannabis Delivered to You
How Pre-Rolls Keep Winning
Despite all of these pressures, consumers continue to buy pre-rolls at record levels, and that’s because the category still solves several key needs better than many alternatives: convenience, accessibility, portability, innovation and familiarity.
Pre-rolls remain one of the easiest cannabis products for new or casual consumers to understand and consume. These strengths help explain why pre-rolls overtook flower even while operators feel squeezed.
As price competition intensifies, brands may need to shift away from simply being cheaper, as the report suggests future competitive advantage may depend on balancing price, potency, consistency and branding.
That likely means brands that win long term will offer dependable quality and unique products rather than endless discounts. Premium segments such as infused pre-rolls, specialty tips and strong multi-pack offerings can help defend margins better than singles.
What Comes Next
The market report forecasts total pre-roll sales could rise to $3.8 billion to $4 billion in 2026, with long-term growth pushing the category above $5 billion by 2030.
So the category’s future still looks strong, but growth alone does not guarantee easy profits. Pre-rolls overtook flower because consumers love the format, and that battle appears won. The next battle is economic. Which brands can thrive in a category where demand is rising, prices are falling and competition grows sharper every year.
