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Squaxin Indians looking to take cigarette venture coast to coast


By Rachel La Corte -- Associated Press

SQUAXIN ISLAND INDIAN RESERVATION, Wash. (AP) - Tens of thousands of cigarettes roll off an assembly line every day at a warehouse on this small reservation, each carton destined for stores around the state of Washington.

By the end of the year, those cartons could be stacked in stores around the nation. The Squaxin Island tribe, which became the first in the West to manufacture its own tobacco products in 2005, is set to expand its venture from coast to coast.

The Squaxins won't be the first tribal government to have national reach - the Seneca-Cayugas in Oklahoma have sold their cigarettes in numerous states since 1999. Individual tribal members at other tribes, including the Yakamas in eastern Washington, also manufacture their own cigarettes.

For the 1,000-member Squaxin Island tribe, expanding its tobacco industry outside of the state of Washington is an important step to diversify its economy beyond gaming.

''It's just a common sense approach to expanding, rather than just keeping all our eggs in one basket,'' said Bryan Johnson, general manager for Skookum Creek Tobacco.

The tribe has no illusions about taking on Big Tobacco. They are currently manufacturing just 50,000 cartons a month, but can increase that to 250,000 a month, a goal they hope to reach within the next three years, but still a drop in the bucket compared to major cigarette brands.

Philip Morris, which has just over 50 percent of the market, doesn't comment on new players in the business, said spokesman Greg Mathe. But RJ Reynolds Tobacco Company spokesman David Howard said he welcomes the competition. RJ Reynolds makes up just under 30 percent of the market, he said.

''Competition is good for adult tobacco consumers, it gives them more choices,'' he said, but quickly added ''our brands are better.''

Currently, Skookum Creek has three products: Complete and Premis cigarettes and Island Blendz little cigars. They also sell loose tobacco for roll-your-own cigarettes.

This fall the tribe will unveil Winthrop, a brand meant to compete with Marlboro, and Traditions, an additive-free brand meant to take on Natural

American Spirit, which is an additive-free brand owned by R.J. Reynolds Tobacco Holdings Inc.

Bob Whitener, CEO of Island Enterprises, the tribe's development company, expects Skookum Creek to be certified to sell cigarettes in all 50 states within a year.

For now, their main store is on the reservation, about 20 miles northwest of the state capital of Olympia. The Kamilche Trading Post, a gas station and convenience store owned by the tribe, has the tribe's brands prominently displayed in a corner of the store.

Ed Caulfield of Shelton stops by to buy a carton of Premis cigarettes about twice a month.

''I like to support local businesses,'' he said, saying that he normally smoked Kools, but liked these just as much. ''And the price is significantly better.''

A carton of Marlboro Lights here costs $39.65. A carton of Premis costs $18.99.

Under a legal exemption, tribes that sell cigarettes they manufacture themselves don't have to affix the state's cigarette tax - currently $20.25 a carton, the third highest in the nation - to products sold on their own reservation. Skookum Creek products sold elsewhere must have the cigarette tax attached.

All the company's 12 employees are tribal members, and the tribe expects that number to grow to 30 once the company increases.

The Squaxins are expanding their cigarette business at a time when smoking isn't all that popular. In Washington state, the rate is just 17.5 percent, lower than the national average of 20.9 percent. And in 2005, voters in Washington state overwhelmingly passed an initiative prohibiting smoking in bars and restaurants.

But even with the diminishing smoking population, there's money to be made, Whitener said.

Terry Reid, director of the tobacco prevention control program with the state Department of Health, said the state recognizes the right of tribes to include cigarettes as part of their economic engine. But, from a public health

standpoint, he said they are ''concerned about tobacco industry marketing practices, anything that puts more product on the market, and potentially creates new smokers.''

In Washington state, about 32 percent of adult Indians and Alaska Natives smoke, nearly double the rate of the rest of the population, state officials say. The tribes use about $900,000 in state money each year to fight tobacco use. But Indian smoking rates have remained about the same, as the total number of smokers in Washington state dropped by 21 percent since 2000.

Ray Peters, the tribe's executive director, said that the tribe takes high smoking rates seriously. Along with money from the state, the tribe spends its own dollars on smoking cessation and prevention programs, and anti-smoking programs geared specifically toward young members. The tobacco operation also helps pay for the tribe's day care program, and provides checks of about $240 a month to the tribe's elders.

''There's a lot of evils out there and it's our responsibility as a government to educate,'' Peters said. ''But we are also a government that has to create a tax base to build infrastructure.''