Recently, Obagi Medical (hereinafter referred to as: Obagi)’s parent company Waldencast announced the acquisition of aesthetic and medical dermatological innovations company Novaestiq, officially entering the “Class II medical device” field.
As the fastest-growing professional skincare brand in the U.S. in 2024, ranked alongside SkinCeuticals as one of the “Big Three American functional skincare brands,” and a top-tier name in technology-driven skincare… Obagi, with over 35 years of history, has always been a dominant force in the functional skincare category.
However, nearly seven years after entering the Chinese market, Obagi still seems to be struggling to find its footing. On one hand, in 2024, Obagi’s China business plummeted 50% year-on-year; on the other hand, Obagi’s Chinese operating company, OBAGI HOLDINGS COMPANY LIMITED (hereinafter referred to as: Obagi Hong Kong), and its subsidiaries have been taken to court by companies such as Kate Holdings and Sinopharm Holding Distribution Center Co., Ltd. Some subsidiaries have been listed as dishonest defaulters, and their equity has been frozen.
Additionally, offline distributors of Obagi have reported to CHAILEEDO that the brand’s products are being sold online at prices significantly lower than their wholesale cost, and that these issues have not been promptly addressed.
It’s worth noting that as early as 2017, Obagi was acquired by Chinese investment firm Haitong International, becoming a brand with Chinese capital background. Regarding the company’s legal disputes and current status, CHAILEEDO contacted Obagi China immediately. As of press time, no response has been received.
As fellow U.S.-based professional skincare leader SkinCeuticals thrives in the Chinese market, the question remains: what exactly has Obagi “missed” during its nearly seven years in China?
Owing Over 1 Million in Advertising Fees
In Court Against Former Partners
In 1988, veteran American dermatologist Zein E. Obagi founded the Obagi brand. As the first U.S. functional skincare brand certified by the FDA, each of its products underwent clinical trials before hitting the market. With iconic lines such as the Obagi NU-Derm series and L-ascorbic acid VC line, Obagi is widely recognized as a representative American functional skincare brand. In fiscal year 2024, Obagi’s global net revenue reached $149 million, up 26.9% year-on-year.
Looking back at over 30 years of brand history, Obagi has changed hands multiple times. In 1997, founder Zein sold his shares in the brand, and Obagi was listed on the NASDAQ in 2006. Seven years later, Canadian pharmaceutical giant Valeant acquired Obagi for approximately $344 million and took the company private.
In 2017, Chinese investor Haitong International’s China Private Equity Fund completed its acquisition of Obagi for $190 million, making Obagi a skincare brand primarily controlled by Chinese capital.
Although in 2021, Obagi merged with Waldencast and Milk Makeup in a deal worth over $1.2 billion, becoming part of the U.S.-listed Waldencast Group, this did not change the fact that it remains under Chinese capital control.
According to public records, as of the end of 2024, Hong Kong citizen and Obagi Greater China CEO Desmond Dai indirectly holds equity in the U.S.-listed Waldencast, making him the company’s largest shareholder.
In 2018, just one year after being acquired by Chinese capital, Obagi entered the Chinese market through the launch of a Tmall Global flagship store and later, in 2020, expanded into professional beauty channels such as dermatology and aesthetic clinics.
However, in less than five years since entering the Chinese market, Obagi’s operations appear to be in trouble.
According to CHAILEEDO’s incomplete statistics, since 2023, Obagi’s China-related companies have been sued by several companies including Kate Holdings, Sinopharm Holding Distribution Center Co., Ltd., and Shanghai Rongzhi Marketing Planning Co., Ltd. (hereinafter referred to as: Shanghai Rongzhi), all for contract disputes.
Among them, according to documents disclosed on China Judgements Online, Shanghai Rongzhi signed an “Obagi 2023 Q1 Advertising Release Contract” with Obagi China affiliate Shanghai Obagi. The contract totaled RMB 2.7 million ($139,400). After fully performing its contractual obligations, Shanghai Rongzhi was still not paid in full, leading the court to order Shanghai Obagi to pay RMB 2.3 million ($320,600) and interest.
As a result of non-compliance, Shanghai Obagi was listed as a dishonest defaulter and subjected to consumption restrictions for “having the ability to fulfill obligations but refusing to comply with effective legal documents.”
Due to multiple lawsuits, shares totaling approximately RMB 18.07 million ($2.5 million) in Obagi’s parent company, Shenzhen Songjing Investment Partnership (Limited Partnership), were frozen. Additionally, equity worth $500,130 in Shanghai Obagi was frozen, and RMB 1 million ($139,400) in equity of Obagi (Xi’an) Pharmaceutical Technology Co., Ltd. was also frozen.
Notably, many of the companies suing Obagi’s Chinese affiliates were formerly its business partners. For example, Kate Holdings formed a strategic partnership with Obagi as early as 2021. Public information shows that within just nine months, Kate Holdings helped Obagi reach the 100-million-yuan revenue club and facilitated its entry into SKP.
Another plaintiff, Sinopharm Holding Distribution Center Co., Ltd., is a leading pharmaceutical distributor in China and had previously collaborated with Obagi to open the brand’s first global duty-free flagship store.
When contacted about the above-mentioned contract disputes, CHAILEEDO reached out to Obagi China, but the company declined to respond, citing “no internal comment at the moment.”
Regarding Obagi China’s legal issues, CHAILEEDO also contacted Kate Holdings as an investor. The company said, “The case is still under trial” and “both parties are still in discussions,” also revealing that it had previously helped operate Obagi’s Taobao store and that the case relates to goods and payments.
Once Deeply “Tied” to Influencer Luo Wangyu
Distributors Question Weak Channel Management
As two major American functional skincare giants, both Obagi and SkinCeuticals possess strong dermatological backgrounds and highly technical hero products, dominating the professional skincare channel in the U.S. market.
However, their brand awareness and sales performance in China differ vastly. According to the financial report of Obagi’s parent company Waldencast, Obagi’s revenue from the Chinese market in 2024 was only $2.804 million. In contrast, according to CHAILEEDO data, SkinCeuticals’ GMV on Taotian platforms alone exceeded RMB 3.4 billion ($474 million) in the same period—highlighting a staggering gap.
CHAILEEDO’s analysis finds that factors such as channel selection and control, brand building, and differences in business mindset significantly influence the survival of overseas functional skincare brands, which have long been confined to professional channels, in the Chinese market.
For example, Obagi’s numerous challenges in China may reflect its shortcomings in channel strategy and pricing control. From a timing perspective, Obagi only entered China via cross-border e-commerce at the end of 2018—much later than its peers in both medical aesthetic channel development and online momentum capture—lacking any first-mover advantage.
In terms of channel selection, Obagi, which had long focused on doctors’ clinics in the U.S., first tested the Chinese market through cross-border e-commerce. It wasn’t until 2020, nearly two years later, that it officially announced its entry into professional channels—showing a somewhat slow response. The brand’s mixed online and offline strategy may also have hindered it from establishing sufficient mindshare in the professional channel during the early stages.
It’s worth noting that pricing control has always been a core issue in channel management, and Obagi appears to suffer from some pricing chaos. CHAILEEDO observed that, on Taobao-related platforms, aside from Obagi’s official flagship store and its overseas flagship store, personal shops specializing in overseas purchasing account for a significant portion of sales.
For instance, in 2024, CHAILEEDO data shows that just eight personal stores on Taobao sold over RMB 10 million ($1.4 million) worth of Obagi products, while the official Obagi flagship store’s GMV was only around RMB 30 million ($4.2 million). Furthermore, personal store prices are far below official retail prices. For example, Obagi’s flagship store lists its 30ml 10% L-ascorbic acid VC serum at nearly RMB 700 ($97), while multiple personal stores claim to offer the same U.S. version at just RMB 100–200 ($13.9-$27.9)—less than one-third the official price—mostly near-expiry products dated for 2026 or 2027.
An aesthetic clinic distributor for Obagi also expressed frustration to CHAILEEDO, stating: “Some Obagi products sold through cross-border e-commerce are priced at just 20–30% of our purchase price. The brand said someone was violating sales rules and they’re investigating, but we haven’t gotten any updates.”
The distributor, who has worked with Obagi for nearly two years, noted that price disorder began appearing at the end of last year and worsened this year. The distributor also tried to return inventory but found the brand’s buyback price unacceptable: “For a 15% VC product that we bought for around RMB 300 ($41.8), the return price was only RMB 20 ($2.8) per bottle.”
“I feel like I’ve been ‘hurt,’” the distributor remarked bluntly about the partnership.
In response, CHAILEEDO contacted Obagi China and several of its distributors. As of press time, Obagi China has not responded. Several distributors said they are still cooperating with Obagi but declined to share further details.
Regarding Obagi’s development in the medical aesthetics channel, a senior distributor stated plainly, “Obagi hasn’t established brand strength in China—many people in offline clinics don’t even recognize the name.”
CHAILEEDO also noticed that in online channels, Obagi had been deeply tied to Douyin influencer Luo Wangyu. According to CHAILEEDO data, Obagi’s Douyin GMV in 2023 was between RMB 50–75 million ($7-10 million), with nearly 90% driven by influencers. Of this, Luo Wangyu alone generated GMV of RMB 25–50 million ($3.5-$7 million), accounting for over 80% of influencer sales and moving 75,000–100,000 units.
However, last year, Luo Wangyu’s GMV for Obagi fell to RMB 10–25 million ($1.4-$3.5 million), with 25,000–50,000 units sold. Obagi’s total GMV on Douyin also dropped to RMB 25–50 million ($3.5-$7 million).
Since last year, Obagi seems to have realized the challenges facing its channel development. In December, Obagi’s U.S. headquarters signed an agreement to establish its China New Retail Headquarters Project in the China-Germany (Changzhou) Innovation Industrial Park in Jiangsu. The aim is to set up a China holding HQ to centrally manage and invest in its local subsidiaries and develop a new industrial base integrating livestreaming commerce, smart supply chain, omnichannel marketing, and innovative retail.
Who Will Be the Next “SkinCeuticals”?
As Obagi faces challenges in its development in China, the country’s functional skincare market is entering a new phase—one marked by deeper involvement from dermatology and full penetration into medical aesthetics scenarios.
For instance, as the earliest functional skincare brand to collaborate with Chinese dermatology experts and aesthetic clinics, SkinCeuticals was the first to introduce the concept of “integrated skincare” in China. By seamlessly combining medical aesthetics with functional skincare, it achieved explosive growth on the consumer end and became a benchmark success in this space.
Today, more and more brands are recognizing that the synergy between functional skincare, skin science, and medical aesthetics will be a critical direction for the Chinese functional skincare market. Especially as perioperative integrated skincare becomes an industry consensus, seizing this golden track has become a collective move among brands.
This transformation in China’s functional skincare market is also attracting interest from many international skincare players. In March of last year, global aesthetics biopharma company Allergan Aesthetics announced the entry of its high-tech skincare brand SKINMEDICA® into the Chinese market. Regarded as a leading functional skincare brand in North America, SkinMedica brought with it the concept of “aesthetic-skin fusion,” aligning with China’s growing trend of extending skincare from clinical to at-home settings.
Allergan Aesthetics China General Manager Qiu Hanhua publicly stated, “Technological innovation is expanding the boundaries of medical aesthetics. As the industry upgrades, new tracks are emerging. Allergan Aesthetics has recognized the unmet demand among Chinese consumers for professional, scientific, and efficacious skincare—and is proactively investing to meet it.”
In February this year, The Ordinary, a hero brand among ingredient-conscious consumers, officially entered the Chinese market via Sephora China. In a prior interview with CHAILEEDO, founder Nicola Kilner said, “Chinese consumers are becoming increasingly clear about their skincare needs and product selection criteria. They’re getting smarter—our arrival couldn’t be more timely.”
At the same time, functional skincare brands are proactively positioning themselves across various niche scenarios within medical aesthetics in an effort to establish strong brand awareness and build competitive moats. For example, Clinique recently released its 2025 White Paper on Post-Laser Hyperpigmentation, addressing a key pain point in post-laser treatment care and offering solutions to win over consumer mindshare.
AOXMED, the medical aesthetics brand under Botanee Group, has also introduced a targeted solution for post-laser hyperpigmentation—the Anti-Darkness Dual Stars.
In fact, AOXMED is not alone. CHAILEEDO has noted that a wave of domestic functional skincare brands rooted in medical aesthetics and hospital channels is gaining momentum. With a solid foundation in professional institutions and channels, these brands are now actively expanding into new segments like “cosmeceutical-device integration.”
For example, Fuqing, an early mover in doctor-research collaboration, has upgraded its existing functional skincare product line into a more holistic model encompassing both clinical aesthetic treatments and at-home care—implementing a dual-track strategy of skincare and medical device integration.
Zhanyan, meanwhile, has partnered to release The Blue Book for Emergency Care After Energy-Based Treatments, targeting a broader audience within the medical aesthetics space. By promoting scientific knowledge on post-treatment skin repair, it is striving to capture consumer mindshare in the medical aesthetics field with a “cosmetic-device combined use” approach.
From niche to mainstream, from clinical to consumer-facing, the boundaries of functional skincare are being pushed wider than ever. The once-clear lines are blurring—driven by consumer demand for professional value and a return to addressing real pain points in the skincare journey.
functional skincare is once again entering its golden era. As equal opportunity is placed before every brand, the question remains: who will seize the moment, break through the competition, and become the next “SkinCeuticals”? This will be the most compelling storyline in the next chapter of China’s functional skincare market.
