Washington state's newest — and, as best as anyone can tell, first-ever — cigarette manufacturer won't extol the "cool, clean"...
Washington state’s newest — and, as best as anyone can tell, first-ever — cigarette manufacturer won’t extol the “cool, clean” taste of its product or its “refreshing” flavor.
“Cigarettes aren’t good for you,” said Bob Whitener, head of Island Enterprises, a holding company for the Squaxin Island tribe’s businesses. “Being additive-free doesn’t make them good for you. Being ‘light’ doesn’t make them good for you.”
But with the Mason County tribe’s Skookum Creek Tobacco set to start churning out its “Complete” brand cigarettes next month from its new factory, the Squaxins hope to become a powerhouse in the budget smokes business.
“What we’re saying is, if you choose to smoke [cigarettes], choose ours, because it’s a good product at a better price,” Whitener said.
$15.99 for a carton of Completes at tribal shops.
$30-$35 for a carton of low-end cigarettes at off-reservation stores.
Skookum Creek, say Whitener and other tribal members, isn’t about creating new smokers; it’s about using a quirk of the tax law to compete against “second-tier” cigarette brands and create reservation jobs.
“I don’t think we feel real guilty about going after the big boys,” he said. “I think there’s room in the market for an honest cigarette company.”
The 25,000-square-foot factory will open officially Saturday, though production is not likely to start until later. It will employ 15 to 20 people at first, Whitener said, and be able to produce up to 100,000 10-pack cartons a month.
The Squaxins hope to sell their cigarettes — along with pipe tobacco, loose “roll-your-own” tobacco, and perhaps imported cigars — at tribal smoke shops throughout the state, and eventually to nontribal distributors.
The Squaxins chose Complete as a deliberately generic brand name, Whitener said: “You want it to be fairly bland, but get across that it’s a quality cigarette.”
To build the brand even before its factory was ready, the tribe last year began selling Complete cigarettes, made by a nontribal supplier, through its smoke shop and those of other tribes. Those smokes use the same tobacco blend as the tribally manufactured version that will supplant them.
A carton of Completes sells for $15.99 at tribal smoke shops, compared with $30 to $35 a carton for low-end cigarettes at off-reservation stores. The price won’t change when Completes are made on tribal land.
The money for the multimillion-dollar factory came from the Squaxins’ other tribal enterprises — notably its Little Creek Casino. Officials won’t say how much the plant cost, or how much they expect to sell.
The Squaxin tribe has 850 enrolled members; their land lies in Mason County, a few miles south of Shelton. Other tribal enterprises include a hotel, the Kamilche Trading Post gas station/convenience store, and the Harstine Oyster seafood company.
Cigarettes sold on tribal land to tribal members are exempt from Washington’s $1.425-per-pack cigarette tax, one of the highest in the country (though they’re not exempt from the federal tax of 39 cents a pack). Off tribal lands, a carton sold in Washington carries $18.15 in state and federal taxes.
For years, nontribal smokers avoided the state tax by buying cigarettes at tribal stores. Those nontaxed sales had long been a source of friction between the state, which said it was losing millions in revenue, and tribes, which said enforcement efforts infringed on their sovereignty.
Over the past few years, though, many of the state’s tribes have negotiated compacts to resolve those disputes. Those tribes agreed to tax cigarettes at the state rate; in return, they keep the tax revenues for tribal purposes.
The Squaxins signed their compact in December 2001, the first tribe in the state to do so, said Leslie Cushman, the state Revenue Department’s tribal liaison. However, the compact applies only to nontribally produced cigarettes.
State taxes do not apply to “value generated on a reservation” — that is, on products made by Indians on Indian land, Cushman said.
“When the tribe owns and manages the facility, when they have tribal members running it, and take these resources and make their product, that’s value generated on the reservation,” she said. That exemption was extended to the Completes manufactured off the reservation because they were part of a tribal product’s launch.
When the Squaxins signed the compact, their application for a federal cigarette-manufacturing permit already was pending before the Bureau of Alcohol, Tobacco and Firearms. The tribe had applied in 1999, tribal attorney Kelly Croman said, but did not receive its permit until 2003.
State and tribal officials said they didn’t know of any previous commercial cigarette maker in Washington.
The Squaxins don’t expect anyone to ditch Marlboros — considered a premium brand — for Completes. They’re aiming for people smoking non-national brands or generic cigarettes.
“This is a second-tier product at a generic price,” Croman said. “At the bottom [tier], people are smoking really lousy products.”
Cigarette sales are the tribe’s second-biggest revenue source after the casino, Whitener said, though sales dropped after the tax compact (which coincided with a 60-cent jump in the state tax).
His goal, at least for now, is to stabilize cigarette sales and have the manufacturing operation break even by the end of the year.
At least one other tribe, the Seneca-Cayuga tribe in Oklahoma, is following the same strategy. Seneca-Cayuga Tobacco has made Skydancer and other brands since May 2000, according to the company’s Web site.
The Omaha tribe in Nebraska began making cigarettes in 1997 but shut down its operation in 2002 after four states sued it for not paying into an escrow fund for cigarette makers that were not part of the 1998 master tobacco-industry settlement. The Squaxins are negotiating with states to resolve the escrow-payment issue in advance, Whitener said.
Many tribes, even those with lucrative gambling operations, are trying to diversify their economies and create on-reservation jobs, said Mario Gonzalez, project director for the Northwest Native American Business Development Center in Seattle.
Gonzalez pointed to the Tulalip Tribes in Snohomish County. Besides operating two casinos, the Tulalips have built the Quil Ceda Village retail development and have plans for a water park and a luxury hotel.
“If you have 80 percent of the money coming into the reservation going straight out again, it’s not helping anyone,” he said. “Ideally, I think what the tribes like to see is some employment for their members.”
Besides, he said, tribes can’t assume they’ll always have a monopoly on casino-style gambling, even though last year’s slot-machine initiative failed 61.5 percent to 38.5 percent.
Whitener, who said he doesn’t smoke, acknowledged that the tobacco industry has long been attacked for selling an inherently dangerous product. But unlike the big tobacco companies, he said, Skookum Creek is upfront about the hazards of smoking.
And given that some people will smoke anyway, he said, “who better to sell a product like cigarettes than the [tribal] government, where the money goes back into schools and social services?”
Drew DeSilver: 206-464-3145 or email@example.com