Youths recruited into Victoria's illegal tobacco and vape wars were paid just $500 on one occasion to set fire to a shop front.
In a public hearing for a parliamentary inquiry into the state's tobacco and e-cigarette controls, Assistant Commissioner Martin O'Brien said as the cost of legal tobacco products has increased, gangs have stepped in.
The products were mostly being shipped from China and "Arab nations", he said on Monday.
"Organised crime see that as a very easy opening to make high profit with low risk," he said.
"It's not got the penalty associated with bringing in a container load of cocaine or heroin, it's low risk, high reward."
In recent years, dozens of shop fronts and other venues have been firebombed in an ongoing battle for control of the market, including using youths to light fires and do standover extortions.
"There hasn't been an arson for about one month now, in regards to tobacco, but we have made significant numbers of arrests," Mr O'Brien told the inquiry.
"They're using young kids to go in and do the jobs for as little as $500 on one occasion, to commit an arson."
Victoria Police believed a wholesale licensing scheme paired with enforcement powers like those in other states is needed.
He said creating such a regime would make it more obvious for which businesses are operating illegally, particularly in regional areas.
However, Mr O'Brien said the force did not want to be the enforcer of any tobacco regulations.
Premier Jacinta Allan announced in March the government would start working on a tobacco retailer and wholesale licensing scheme.
