Secret “24-hour factories” and online channels: the illegal tobacco market is moving into new territory

“24-hour factories”: mobile, quickly dismantled plants

According to an industry source familiar with the global market and speaking in the article, small-capacity, easily assembled and dismantled “24-hour factories” are spreading across Europe – including Hungary. These can operate at lower speeds, even in residential environments, and the packaging is often rudimentary or incomplete. According to Economx, in the case of larger units, the actors often calculate with getting caught: the logic is that the investment will generate a profit within a few months – within six months at the latest – even if the authorities later seize the assets.

According to the example quoted from the NAV communication, six million cigarettes and enough tobacco to produce another twenty-one million cigarettes were found in an illegal factory in Budapest.

Suspicion of human trafficking and “imported” labor

The Economx article reports on rumors that also raise suspicions of human trafficking: according to the description, technical specialists who are often made to work in illegal factories without identification papers, often “trafficked” from Eastern Europe, work in the They cannot leave their jobs until they are caught. According to the article, their knowledge may later become “marketable” in other illegal Western factories through criminal organization channels. According to the source, the authorities also perceive that the supply chain is international, and in Hungary the Tax and Customs Administration typically targets Eastern European citizens.

According to the OLAF and EUROPOL assessment cited in the text, tobacco product counterfeiting and smuggling are often linked to the same group of perpetrators who may also be involved in other types of crime (such as human trafficking, money laundering), while the legal risk associated with tobacco is milder in several countries than, for example, drug smuggling.

The rise of vapes and the crackdown on online sales

According to the series of articles, the 2024 KPMG report already measured the illegal trade of alternative products separately and concluded that a visible black market had developed who, even if smaller than that of cigarettes. The article highlights: while counterfeiting is less common with heated products due to the more complex technology, in the case of unsealed, flavored e-cigarettes (vapes), there is an online offer of dubious origin that also affects Hungary. According to the report, the risk is that these products are often not qualified, and the consumer may buy a device with unknown composition.

Economx also gives an example of official action: according to the report of the National Tax Service, its employees seized illegal products through test purchases (ordered from an online advertiser), the seller can expect a fine of millions. The NAV also communicated that parcel traffic is subject to increased control throughout the year and before holidays, and emphasized that tobacco products can only be sold in tobacco shops in Hungary.

KPMG: Organized crime is moving production closer to end markets

Based on the KPMG report, Economx highlights that organized crime groups (OCGs) are increasingly moving production closer to consumer markets by optimizing the value chain. This can reduce transportation costs and detection risk, while the report also shows that the size of seizures is often decreasing, which may indicate that they are holding less stock and speeding up distribution. And the direct-to-consumer (D2C) direction in distribution may strengthen, bypassing traditional retail outlets with online platforms and social media.