WINNEBAGO, Neb. | A factory on the Winnebago Tribe's reservation, bordering a corn field, churns out products from a much different cash crop.
At its peak, Rock River Manufacturing's 15,000-square-foot plant produces 5,000 cigarettes a minute, or 1.1 billion per year. The latter number is more than enough to circle the planet a few times, plant director Adam Bowen said.
At the northeast Nebraska factory, Rock River makes its own Fire Dance, One Spirit and Silver Cloud brands of cigarettes. Several lines of filtered cigars and pipe tobacco also are made there and marketed under the Fire Dance and One Spirit monikers.
All of the products are made with a special blend of tobacco grown, processed and shipped in 220-pound boxes from North Carolina. The Tar Heel State is the nation's leading tobacco producer, with more than 331 million pounds of the plant were harvested there last year, according to the U.S. Department of Agriculture. Rock River requires about 2.2 million pounds of tobacco to produce its products.
In addition to cigarettes and other traditional tobacco products, Rock River has expanded into the smokeless vape pen, e-cigarette and e-liquids market with its Kohu brand of products launched earlier this month. The word “kohu” originates from the New Zealand Maori indigenous people and means steam.
The financier of the $5 million dollar investment in tobacco and related substances is Ho-Chunk Inc., the economic development corporation for the Winnebago Tribe.
Rock River is one of dozens of Ho-Chunk subsidiaries spread out around the globe. The tobacco factory has helped create about 15 jobs on the reservation, ranging from plant operators to sales staff.
Getting into the modern day cigarette business is no simple matter, due to the incredible amount of federal and state regulations companies have to abide by, Bowen said.
“When we first decided to put a plant on the reservation, we didn’t have a brand so we looked at what it would take to have a brand and we started on the Fire Dance and One Spirit pathway, but the rules and regulations were that if you didn’t exist at a certain point of time you couldn’t introduce a new brand, so that’s why we went with filtered cigars and pipe tobacco for those two brands initially,” Bowen said.
An example of a large amount of red tape the tribe has encountered is that it can't sell its locally-produced tobacco products off the reservation in Iowa, Nebraska or South Dakota. The Rock River products are available in 26 other states and on most reservations nationwide.
"For the Siouxland area, it's only on reservation," Bowen said. "If you get outside of this area — each state, you have to go through their regulations to be on their list and so we've chosen selectively which states we want to be listed in."
All but one of the seven Ho-Chunk-owned Pony Express convenience stores carry the Rock River products. The exception is the South Sioux City store, which is outside the reservation. Outlets that sell the products include the Pony Express store at WinnaVegas Casino & Resort. The Winnebago Tribe owns and operates the casino on its land near Sloan, Iowa.
Bowen said it's a slow process to make the Rock River brands available in other states, but one they are being patient about. One issue holding up the sale of their products outside of reservations in Nebraska is an ongoing and longstanding negotiation with the state over how much to tax the products for.
"We fight a lot of regulatory issues with the state over tobacco and so we just thought if we built our own factory we wouldn't have any of those problems," said Lance Morgan, president and CEO of Ho-Chunk Inc.
"If the tribe makes the product on the reservation, then it can implement a tax system that preempts the state system and so that's why did it in order to keep prices low. Otherwise, there's no real reason for a cigarette factory to be in rural Nebraska," he joked.
Low prices and the appeal of Native owned and manufactured cigarettes are the two of the biggest selling points of the Rock River produced tobacco brands said Janice Jessen, communications director for Ho-Chunk.
"We are priced very competitively and we are more of a discount brand, so they have an opportunity to be able to buy a quality tobacco product but at a significant cost difference from what premium brands cost, so Marlboro and all of the more premium brands are significantly higher priced than what ours are," she said.
Depending on the state, Bowen said the average price of a carton of Silver Cloud or its other cigarettes is about a third of what the premium brands cost. The Rock River brand averages about $2.50 per pack, compared to an average retail price nationally of $5.51 per pack, according to Fairreporters.net. The highest price nationally is in New York State with an average price of $12.85 a pack.
The 2013 acquisition of the Silver Cloud brand from Global Tobacco of Texas, which owned several lines of smokes, led Ho-Chunk to start manufacturing cigarettes.
Bowen said Morgan visited the company to see about acquiring a brand from them and was almost immediately sold on Silver Cloud.
“When Lance went down there, he saw Silver Cloud — you’ll see it when I show you the package — but on the front there’s a chief, an Indian chief and he goes, ‘That’s the one I want.’” Bowen recalled, followed by a quick laugh.
Shortly after the acquisition, Rock River moved the production of Silver Cloud cigarettes from Global's factories in Texas and Florida to the northeast Nebraska reservation. The Rock River factory features equipment imported from the Czech Republic, Indonesia and Spain.
While manufacturing cigarettes and other tobacco products may seem to to be an out of the ordinary investment for Ho-Chunk, which has subsidiaries that do everything from building homes to selling automobiles, it actually falls in lines with the corporation and the tribe’s roots.
Almost since Ho-Chunk’s inception 23 years ago, the company has had a hand in the tobacco industry through its subsidiaries, Jessen noted.
“Tobacco has been a big part of Native American culture for centuries and it was used in ceremonies, negotiations and visits with other tribes and has been a part of the culture for a long time,” she said. “That’s kind of why — to a certain degree — why we wound up in the tobacco business. We knew about it and it was part of the history of the Winnebago Tribe.”
Jessen views tobacco as one of the foundational elements that helped build Ho-Chunk up to where it is now. Native American tribes don’t have to collect state taxes on tobacco or fuel, which gave Ho-Chunk a price advantage over competitors in both of those markets through its distribution network and Pony Express stores.
“That generated significant revenue for us and allowed us to then diversify into other businesses,” Jessen said. “So the tobacco business basically funded our ability to get into federal government contracting, into construction and housing and all these other industries we are in today.”