California Cannabis Industry Overview
Market Size and Landscape
California’s legal cannabis market generated $4.66 billion in sales in 2024, a slight decline from $4.89 billion in 2023. This roughly 4.7% year-over-year drop reflects a market correction after the pandemic-era surge. Notably, the decline in revenue is deemed price-driven rather than demand-driven given that the volume of cannabis sold continues to increase even as dollar sales dip. Despite this modest contraction, California remains the nation’s largest cannabis market, consistently outperforming other states in total revenue.
In the first half of 2024, California logged over $2.0 billion in legal sales, averaging approximately $347 million per month. The next closest state, Michigan, saw about $1.6 billion in the same period – meaning California’s market is about 25% larger in sales despite Michigan’s higher per-capita consumption.
Adult-use (recreational) sales dominate the market, comprising 90–92% of total sales in 2024. Medical-use cannabis, while historically significant in California, now accounts for only about 8% of sales.
Flower remains the top-selling product category, with sales at $1.4 billion in 2024 – about 33% of the market – but has been declining year over year from its 2021 peak. In contrast, vape cartridges and pre-rolled joints have rapidly gained ground. Vape sales grew from $889M in 2020 to $1.3 billion in 2024 (30% share). Pre-rolls are the next major segment ($720 million, 17% share), closely followed by edibles (about $470 million, 11% share).
Pre-rolls’ share has been chipping away at flower’s dominance as consumers embrace its convenience. Its market share climbed to 15.9% of all units sold in 2024, up from 9.8% in 2020 . In fact, pre-rolls were the fastest-growing segment from June 2023 to June 2024. Pre-roll revenue jumped 11.9%, the largest YOY gain of any category - outpacing growth in other formats like edibles or vape carts, even as overall market sales plateaued. Most recently, California’s pre-roll unit sales surpassed that of traditional eighth-ounce flower packages, indicating many consumers now prefer buying joints over small jars of bud.
The state’s regulated industry has around 8,500 active cannabis business licenses as of late 2024. Notably, there’s been a consolidation in cultivation licenses. The DCC’s 2024 outlook report revealed active cultivation licenses dropped from 8,493 at the end of 2021 to about 4,805 by the end of 2024 – a 43% decrease. This doesn’t mean California has half the growers it did; rather, many small plot licenses were merged or ceased as new state regulations (SB 833) allowed cultivators to convert multiple small licenses into a single larger license for efficiency.
For pre-roll makers, this consolidation means fewer, larger suppliers to buy flower from, and potentially more stable supply as weaker operations shake out.
On the retail side, California still has a scarcity of dispensaries in many regions (about 60% of municipalities ban cannabis sales). To address this, the state launched the Retail Access Grant program in 2023, giving grants to cities/counties to help open more licensed retailers. By 2024, this started to bear fruit, with a handful of previously “dry” jurisdictions beginning to license dispensaries - indirectly benefiting pre-roll brands by expanding the points of sale for their products.
Industry Challenges
Price Compression, Labor Costs, and Operational Challenges
A defining challenge in 2024 is ongoing price compression as wholesale and retail prices for cannabis have dropped sharply, squeezing business margins. California’s wholesale flower prices have fallen over 50% from their peak a few years ago. On the retail side, consumers are paying much less per unit than before. The average price of an eighth-ounce of flower (3.5g) dropped from about $38.86 in early 2020 to $22.72 by mid-2024 (inflation-adjusted).
At the same time, price compression in the market effectively raised the labor cost share of each pre-roll – i.e. if a joint sold for $10 last year and $7 this year, the same $0.50 of labor is a bigger percentage of the sale. Many operators report having to lay off staff or streamline production in 2023–24 to stay afloat. Producing pre-rolls at scale is labor-intensive, and controlling labor costs has become a major challenge (and focus) for manufacturers in 2024. In California’s high-wage environment (minimum wage ~$15–16/hr), labor can be a significant cost per pre-roll, especially for smaller operators.
The upshot is that pre-roll companies are highly motivated to trim labor hours per joint through any means possible. To combat high labor costs, leading manufacturers are investing in automation and improved processes. Multi-cone filling machines (like the Futurola Knockbox, STM RocketBox, or advanced systems like the RollPros Blackbird) have become standard equipment. These machines can fill hundreds of cones in minutes, a task that would take hours by hand. Automated grinders and sifters make filling more efficient. The result is significantly higher throughput. It’s not uncommon now for a small team (2–3 people) with modern equipment to produce several thousand pre-rolls per day. This drastic cut in labor-hours per unit is a lifeline for maintaining margins.
Despite automation, producers must still maintain quality control, which is another labor component. High-quality cones that are uniform in size and shape speed up production – they fit machines perfectly, pack evenly, and result in consistent weights. If cones are poorly made (inconsistent length, loose crutches, etc.), workers end up reworking or checking weights manually, which adds labor. Leading pre-roll manufacturers thus insist on premium cones and tight specs from suppliers.
Illicit Market Dominance
Widespread unlicensed cannabis activity remains the single greatest challenge for the industry. An estimated 60% of California’s cannabis market is still served by the illicit market. Unregulated growers produce far more volume (over 11 million lbs in 2024) than the legal market demand, resulting in a flood of cheaper illegal product. Enforcement agencies like the state’s Unified Cannabis Enforcement Taskforce have seized significant quantities of illegal product, but these efforts (over $534 million worth seized since 2022) address only a fraction (~5%) of the illicit market. The persistence of unpermitted dispensaries and illicit delivery services creates an uphill battle for compliant businesses to attract consumers.
High Taxes and Regulatory Burdens
California’s cannabis tax burden has long been one of the highest, and 2024 brought a mix of relief and looming changes. Consumers face effective tax rates of 25–35% on retail purchases once the 15% state excise tax, state sales tax (~8%), and local cannabis business taxes (often 5–10%) are all applied – a point of constant pain for businesses and a competitive disadvantage versus the untaxed illicit market.
In mid-2022, the state eliminated the weight-based cultivation tax, which provided relief to cultivators (and indirectly lowered input costs for pre-roll makers using California flower). However, to compensate, the law allowed the state to adjust the 15% excise tax upward in future years to meet revenue targets – a looming increase to 19% excise by July 2025 if not averted.
Complex regulations (extensive licensing, testing, packaging, and local zoning rules) also raise costs and compliance barriers. Industry leaders cite “overregulation” alongside high taxation as major factors in widespread business struggles. The industry is hopeful that political pressure will lead to tax reductions or credits to stimulate the legal market like the “High-Road Cannabis Tax Credit” which is already available for certain operators who provide benefits and pay good wages.
Opportunities in the California Cannabis Industry
Expansion of Social Consumption & Tourism
California’s cannabis scene is poised to evolve beyond retail dispensaries. In 2024 the state legalized on-site consumption lounges (via AB 374) to allow cannabis cafes where adults can purchase and enjoy cannabis in a social setting. Effective January 1, 2025, licensed lounges can also serve food, non-alcoholic drinks, and live entertainment alongside cannabis
Entrepreneurs can capitalize on cannabis tourism, hosting events and creating destinations for enthusiasts. As more local governments permit lounges, California could set trends in social consumption, providing a safe, regulated alternative to public or illicit consumption while drawing visitors seeking a unique cannabis-friendly experience.
Emerging Product Trends and Innovation
Even as overall sales plateau; certain product segments offer bright spots for growth. Cannabis-infused beverages have shown consistent upward sales trends, defying the market downturn in 2024. Consumer interest in convenient, low-dose, and novel consumption formats – from THC seltzers to infused cocktails – is rising.
Similarly, premium pre-rolls (especially infused pre-rolls) are capturing a larger share of sales as consumers seek curated, ready-to-use products. Over the first half of 2024, infused pre-rolls made up ~44% of all pre-roll sales by value in California. In the 18 months through mid-2024, sales of infused pre-rolls skyrocketed 61%, reaching an estimated $1.75 billion across major markets. Consumers are clearly seeking out the higher THC levels and novel experiences these products offer. As flower and extract prices have fallen, infused pre-rolls have become more affordable, accelerating their popularity.
Beyond potency, consumers are showing appreciation for high-quality pre-roll construction – notably, slow-burning rolling papers and well-designed cones. A smooth, even burn not only prevents waste but also helps fully savor the flower’s terpenes and flavor. This has led to rising demand for refined papers that burn longer and cleaner. Many brands now tout their use of slow-burning, ultra-thin papers or special wraps to differentiate their pre-rolls. For example, some offer rice paper cones that burn at a measured pace, or blunts made with hemp wraps that don’t canoe or char too quickly.
Consumer buying patterns have also shifted toward multi-pack pre-rolls and smaller “dogwalker” joints. Multi-packs (packages of 2, 5, or 10 pre-rolls) have exploded in popularity since 2021. In 2018, only ~27% of pre-roll sales were multi-packs; by 2023, multi-packs made up about 49% of all U.S. pre-roll sales. California reflects this trend – nearly all of the top-selling pre-roll products in the state are now multi-packs, often of mini pre-rolls.
This indicates an opportunity for brands to innovate with new product types, higher-quality offerings, and wellness-oriented formulations (e.g. CBD-rich products, edibles with functional ingredients). Companies that tap into evolving consumer preferences – such as by developing popular beverage lines or upscale infused products – can buck the wider sales slump and cultivate loyal new customer bases
Regulatory Reforms and Market Corrections
Several upcoming changes could improve market conditions for compliant businesses. Industry advocates are hopeful that tax relief is on the horizon – a 2025 bill (AB 564) aims to halt the automatic excise tax increase and keep the rate at 15%, preventing further cost burden on consumers. If successful, this would be a much-needed break for the legal market, helping narrow the price gap with illicit products.
Additionally, California continues to refine regulations and support licensees by extending provisional licensing deadlines via SB 51 to keep businesses operating while they complete compliance requirements.
Over time, enforcement actions against illicit operators and the ongoing market shakeout may reduce competition from both illegal sellers and oversaturated legal supply, leaving a core of more sustainable operators. Some well-capitalized companies see an opportunity in the current downturn to acquire distressed assets and licenses at low cost, positioning themselves for growth when conditions improve.
Furthermore, California has laid groundwork for possible interstate cannabis commerce (through SB 1326, 2022) should federal law allow it – a future scenario that could turn California’s excess production into an export advantage.
Key Legislation : 2024 Updates and 2025 Outlook
SB 1059 (2024) – Senate Bill 1059 was signed into law in September 2024 to prohibit local governments from taxing the state’s 15% excise tax (i.e. charging tax on top of another tax). By eliminating this double taxation, the legislation slightly lowers the effective tax rate on consumers and improves retailer margins, addressing one complaint about California’s high cannabis taxes. This change, effective January 2025, is viewed as a meaningful though modest relief for the industry’s financial pressures.
AB 564 (2025 Proposed) – Assembly Bill 564 (introduced February 2025) seeks to repeal the scheduled increase of the state excise tax from 15% to 19%. That increase is currently set for July 1, 2025 as part of a budget compromise to offset the removed cultivation tax. AB 564 would freeze the excise tax at 15%, acknowledging that many operators already find 15% overly high. The bill is significant because stakeholders argue that a 19% excise would be “ruinous” for legal businesses by further driving customers to the untaxed illicit market
SB 51 (2023, effective 2024) – Though passed in late 2023, Senate Bill 51 took effect in 2024, extending California’s provisional cannabis licensing program through 2031 for certain applicants. This law is important because thousands of operators – especially cultivators and social equity businesses – rely on provisional licenses while working toward annual license requirements (such as comprehensive environmental reviews). By pushing out provisional expiration dates, SB 51 averts a potential cliff where many licenses would have lapsed in 2024, which could have disrupted supply chains and business continuity
The California cannabis market of 2024 is a challenging but exciting arena, especially for those in the pre-roll segment. We’ve seen that pre-rolls are capturing a growing share of consumer spend with innovative products (infused joints, multi-pack minis) meeting the demand for convenience and potency. Yet, success is not just about having a great product – it hinges on controlling costs (through automation and efficient design), securing reliable supply chains, and staying agile amid regulatory shifts. The industry’s evolution – from a flood of competitors to a more consolidated, professional landscape – highlights the need for strong partnerships and differentiation.
As we look ahead, California’s pre-roll category is poised for continued growth in volume. Market analysts project pre-rolls could approach 18–20% of total cannabis sales in the next couple of years. Consumer enthusiasm is high, and with incremental improvements (like better enforcement against illicit trade and possible tax normalization), the legal playing field will hopefully become more favorable.
If you’re a pre-roll brand or retailer looking to thrive in this dynamic landscape, it’s crucial to make data-driven decisions – and to have the right partners. We invite you to connect with our team of pre roll experts at Green Blazer for more tailored insights or support. Whether you need guidance on sourcing slow-burning premium cones or ensuring a reliable supply chain for your pre-roll production, we’re here to help. Our expertise in California’s market and focus on quality solutions can give you an edge – from concept to shelf.
Let’s roll towards success together. Contact us to discuss how we can support your pre-roll business with the latest market intelligence and top-notch production materials.
