Tribe to expand cigarette venture, but at what cost?

SQUAXIN ISLAND INDIAN RESERVATION, Mason County — It started as a tribal smoke shop in an old schoolhouse here 35 years ago. Two years ago, it grew into a cigarette factory, right on the reservation.

Now the 1,000 members of the Squaxin Island Tribe are going big time: The People of the Water, as they call themselves, are taking on Big Tobacco.

The tribe decided a month ago to step up its cigarette-manufacturing operation of about 50,000 cartons a month, sold only on its reservation and through tribal smoke shops on other Indian lands. Now the tribe, which has the capacity to manufacture up to 250,000 cartons a month, wants to go mainstream, even national, with its distribution.

Tribal leaders say they are keenly aware of the uncomfortable position they are in, selling a product that can kill. That's especially true in Indian Country, where the rate of smoking-related illness is 20 percent higher than in the rest of America.

But they also see opportunity — which is far from abundant here on their small, rural reservation — the potential to better fund tribal programs and make more money for individual tribal members.

Economic development has been particularly challenging in Indian Country, said Brian Cladoosby, chairman of the Association of Washington Tribes. Because tribal land is held in trust by the federal government, it can't be mortgaged to raise capital, and private investors are often leery.

So tribes are working to establish new and expanded business ventures such as the Squaxins' tobacco company. And while they know they aren't going to take out the big guys, they want to take some of their shelf space in stores all over the country, and snag market share.

"The real business is to go after Philip Morris and RJ Reynolds," said Bob Whitener, CEO of Island Enterprises, the tribal government's business arm.

"We don't want to create a single new smoker. But we absolutely want to steal customers from those two manufacturers; we have no guilt about that. Who better than a government that puts the money into child care and police to do this? This isn't a private for-profit operation, it's a government operation."

Venture was a first

Nestled in a crook of Puget Sound in Mason County, the Squaxin Island Tribe became the first tribe on the West Coast in April 2005 to manufacture its own tobacco products. Today, the tribe's Skookum Creek Tobacco Co. makes two brands of cigarettes, Complete and Premis, as well as selling loose pouch tobacco and a line of cigars made in the Dominican Republic and marketed as Island Blendz.

By making its own smokes on the reservation, the tribe can sell them on its tribal land without charging state tax. That allows competitive pricing: At the tribe's Kamilche Trading Post mini-mart, a carton of Completes goes for $20.49, and Premis for $18.99. Compare that to the $42.43 price here for a carton of Marlboros.

That's made the Complete and Premis brands the store's top two sellers. When the tribe starts selling off the reservation, it will have to start paying state cigarette taxes — and raise the carton price — but managers say they will be able to undercut the prices charged by major tobacco companies.

"We're not greedy," Whitener said. "They will be much more willing to try our product."

Today the tribe's tobacco sales pay for a day-care program, serving about 100 children, and per-capita payments to tribal elders of $240 per month.

"Cigarette smoking isn't good for you, but it doesn't mean we don't believe it's people's choice; people have a right to do this," Whitener said. "It's no different than the state of Washington using tobacco for revenue generation.

"It's not like we are putting Care Bears on the packages or putting them in Happy Meals."

Part of tribal history

Tobacco is hardly new to this tribe.

"How far back is 'back'?" asked former tribal Chairman David Lopeman. Tobacco was growing in Nisqually when the Squaxins joined the Puyallup and Nisqually tribes in signing the Treaty of Medicine Creek in 1854. Even today, some tribal members wear a bit of tobacco in a pouch around their necks and offer it to the spirits when they pray.

When he builds a fire in the sweat lodge, Lopeman burns some tobacco for the spirits. And he mixes it in a stone pipe for smoking with dried leaves of blackberry, kinnikinick and native willow bark. "It's an act of respect for the spirits; they like the smell and the taste of it like we do," Lopeman said. "It's very important spiritually, it gets me closer to what I am."

Tobacco's economic importance to the tribe also has deep roots. Tribes from east of the Cascades used to trade tobacco to the Squaxins for oysters and clams.

Tribal member Bryan Johnson moved back to the reservation from Panama to run Skookum Creek Tobacco. He walks around the factory, which the tribe calls the "microbrewery of cigarettes," with obvious pride. Johnson remembers the tribe's first smoke shop in the old schoolhouse. It was just about the only tribal business venture back then, except for seasonal fireworks sales.

Today, the tribe is the second-largest employer in Mason County. The cigarette factory employs about a dozen people. The tribe's casino and hotel are a major cash cow, pulling in roughly 4,000 to 5,000 customers a day. The tribe also has a shellfish farm and is considering building a railroad through the reservation in a venture to repackage and distribute propane gas. It's also negotiating with a sunglasses maker in Japan to start making shades on the reservation.

To Johnson, expanding the cigarette operation is just one more part of the tribe's effort to diversify its economy.

"We look at it from the standpoint of creating employment; we are not here to lie or be deceitful," Johnson said. "This stuff will definitely kill you. But tobacco has been here a long time, and it's not going away. We want this to be a reputable business that our grandchildren's children will work at."

Lynda V. Mapes: 206-464-2736 or lmapes@seattletimes.com