Indian tariffs threaten the fastest-growing segment of the cannabis industry

The Trump administration’s recent 50% tariff on India’s imports threatens the fastest-growing industry in the cannabis industry.

India is the world’s largest supplier of pre-roll cones, a key part of the product category is $2.3 billion in sales last year, according to the data analytics company’s headsets.

Custom Cones USA co-founder Harrison Bard said India accounts for about half of the global pre-roll cone supply and Indonesia accounts for the other half.

For retailers selling pre-rolls for just $1, even a small increase in production costs can be tight margins.

Now, operators face a difficult decision: absorb the additional costs, pass them on to consumers or switch suppliers.

Trump Indian tariffs squeeze the edge of cannabis industry

Some pre-rolls are made of cones from India and Indonesia, while others are joints that roll by machines.

Pre-roll supply chains are highly concentrated, with few alternatives outside India, Indonesia and China.

“With 50% tariffs, purchasing from India is expensive,” Bud said. “Some companies have said they can’t do it.”

Custom Cones USA is evaluating the option of using an automatic tapered rolling machine at a production site in the United States, rather than rolling it manually in India.

The cost of sales (COG) of cones varies by paper, filter, printing and other factors.

But it can range from 3 cents per cone to 8 cents, said Hirsh Jain, co-founder of Ananda Strategy, a Los Angeles-based consulting firm.

For five-piece packaging, India’s announced 50% tariff will increase by 8 cents to 20 cents of gear.

Since the brand and retail markings are usually 2 to 3 times, the retail price can increase 20 cents to 60 cents per extra pack.

“In many U.S. markets, this could create a meaningful price increase for pre-rolls,” Jain said.

While Indonesia is still an option, Bad points out that China’s quality is usually less than its disadvantages, and its products are also subject to tariffs.

“In fact, there is no other place that will make cones on a large scale,” Bud said.

Switching suppliers or materials can also disrupt the brand. Many cannabis companies rely on custom brand cones to distinguish their products.

“If your pre-rolls are always in the white paper, you don’t want to switch – it’s part of your brand,” Bud said.

As a result, some people may choose stock cones from existing names with existing Zig-Zag or Raw, sacrificing custom logos to reduce costs.

Rethinking the supply chain

Pre-rolling machine maker Rollpros provides tips for customers to use in pre-rolls in India.

Kyle Loucks, CEO of the Washington-based company, said the increased costs due to the tariffs will be transferred to its customers.

But, more disturbing than the increased cost, the cargo on the border was blocked.

In one example, the shipment of Rollpros included the trick of covering THC, resulting in the seizure of all products in the order – including products without stamps.

“We provide all our customers with a pressing timeline, which makes it more expensive and time-consuming,” Loucks said.

As a result, Lux said he was working on American options to make tips.

“My engineering team is working on what we can do here – it works better for the economy,” he said.

Resilient demand, but undetermined future

Jain said the impact of tariffs will vary from market to market.

“Operators will have to decide by state whether to pass cost increase, accept margin compression or invest in alternative suppliers,” Jain said.

Higher-priced states may better absorb increased costs, while more sensitive markets may see significant disruption.

“Operators with India’s heavy purchases must decide whether to transfer prices to consumers, accept some amount or margin compression or retransfer to other countries such as Indonesia, Malaysia or China,” Jain said.

But he warned that he was reluctant to rush to new suppliers in countries such as Malaysia or Indonesia, given the unpredictability of U.S. trade policy.

“The tariff pattern is turbulent,” he said.

“The president can change his mind and operators need to make the change with caution.

tax evasion

Raw Rolling Papers founder Josh Kesselman said his company had withdrawn from India long ago due to quality issues.

Now they are made with cone factors that reversal in European automated robots, or hand rolling in Indonesia, both with high quality control.

“Both places are facing an increase in tariffs, between 15% and 19%, but not as extreme as India’s 50% tariff,” Kesselman said.

That said, Kesselman still has a problem of rolling tape in India, with some of the cones made in the country embroidered with “Made in France” stamps.

“It’s unfair to us or consumers because they’re misled,” Kesselman said.

Kesselman said he also heard importers from India claim their products are made in Europe and their tariffs are reduced to 15 per cent unless caught.

Another plan involving companies in India underestimate the actual cost of their products, Kesselman said.

“They may sell to related companies in the United States at the price of invoices, 90% less than the actual cost,” he said.

In this way, they only pay small tariffs.

This highlights a larger structural problem.

“The trouble with high tariffs or taxes is that it encourages people in this case to bend or break the rules.”

Margaret Jackson can be reached Margaret.jackson@mjbizdaily.com.