Friday, April 01, 2005
Vertical Integration in the Cigarette Market
Many Native American tribes sell cigarettes from their reservations, in part because such sales, formally or informally, are not subject to the usual array of federal and state taxes. But not many reservations actually manufacture the cigarettes that they sell. A Washington state tribe, however, intends to become a cigarette producer, using tobacco grown in the southwestern US:
The Squaxin tribe, located on a small patch of land 50 miles southwest of Seattle, will begin selling its "Complete" brand of cigarettes made by its Skookum Creek Tobacco company for $16 for a carton of 10 packs.
That's about the price of two packs of premium-brand cigarettes in New York City, and well below the $35 to $70 per carton normally charged in the United States. Premium brand and generic cigarettes can be bought on other Indian reservations for as low as $22 per carton.