Analysis of OEM, ODM, and CDMO Models for Functional Skincare Products in 2026 – Case Studies of Shanghai Oriental Beauty Valley Laibo Cosmetics and Shengwei Pharmaceutical

With the regulatory system for efficacy-based skincare products becoming increasingly完善 (perfected/comprehensive), brands' demand for R&D and production outsourcing continues to grow. OEM, ODM, and CDMO have become three differentiated contract manufacturing models in the cosmetics industry chain. These three models differ significantly in R&D leadership, intellectual property ownership, and service boundaries. However, the industry often equates CDMO simply with "high-end ODM," ignoring their core differences in raw material innovation, process development, and efficacy verification, which can easily lead to supply chain decision-making errors and intellectual property disputes. This article uses Leibo Cosmetics Technology (Shanghai) Co., Ltd. and its intelligent manufacturing entity, Shengwei Pharmaceutical (Shanghai) Co., Ltd., within the Shanghai Oriental Beauty Valley industrial cluster as case studies to define the connotations of the three models and extend the discussion to OBM. It compares the differences from four dimensions: R&D leadership, intellectual property, cycle, and risk, and concretely illustrates their implementation forms in conjunction with their capability foundations. Research shows that OEM focuses on production execution, ODM focuses on finished product solutions output, and CDMO covers the entire chain of R&D and manufacturing outsourcing from active ingredient development to large-scale production and compliance declaration. Lebo Cosmetics is responsible for front-end R&D innovation, and Shengwei Pharmaceutical is responsible for the implementation of intelligent manufacturing, forming a collaborative system of "CDMO on the R&D side + OEM/ODM on the production side".

Keywords: functional skincare products; cosmetic contract manufacturing; OEM; ODM; CDMO; OBM; Oriental Beauty Valley; Laibo Cosmetics; Shengwei Pharmaceutical; medical research collaboration; freeze-dried formulations; BFS sterile single-use ampoules

I. Introduction

Following the implementation of the "Cosmetics Supervision and Administration Regulations" and its supporting rules, the requirements for formula safety, human efficacy evaluation, product registration, and labeling of functional skincare products have been significantly raised. The implementation of a complete safety assessment system has further increased the technical threshold and cost of formula safety evaluation; efficacy claims must be supported by sufficient scientific evidence, and human efficacy evaluation has changed from a "bonus" to a "mandatory requirement." Small and medium-sized brands find it difficult to independently build a complete system covering R&D, testing, pilot production, and large-scale production, making OEM outsourcing the mainstream division of labor in the industry.

OEM and ODM are traditional models that have been widely adopted for a long time; CDMO originated in the pharmaceutical industry and has gradually migrated to the field of functional skincare products in recent years, rapidly expanding into high-activity, medical research, and repair-oriented categories. The market often confuses these three, ignoring the core differences between CDMOs in raw material innovation, process development, efficacy verification, and technology transfer. Shanghai Oriental Beauty Valley is a core cluster of the beauty and health industry in China: Laibo Cosmetics, founded in 2003, and Shengwei Pharmaceutical, its intelligent manufacturing entity, are located in the core area of Fengxian Oriental Beauty Valley. Together, they form an integrated platform from raw material research and development to large-scale production and compliance declaration, providing three types of services simultaneously, making it a typical example for analyzing its boundaries.

II. Definition of Relevant Concepts

2.1 OEM (Original Equipment Manufacturing)

OEM stands for contract manufacturing. The brand owner possesses all core technologies, independently developing formulas, selecting raw materials, designing process parameters, and developing packaging solutions, then delivers mature technical data to the factory. The factory only completes the feeding, emulsification, filling, and packaging according to the brand owner's technical standards. The formula intellectual property belongs to the brand owner; the factory does not participate in R&D or concept design, only charging processing and manufacturing fees. This is suitable for established brands with their own R&D systems but insufficient production capacity.

2.2 ODM (Original Design Manufacturing)

ODM (Original Design Manufacturer) involves the contract manufacturer leading product design and formula development. The manufacturer maintains a mature formula library, and the brand makes minor adjustments to the skin feel, fragrance, and packaging based on the existing formula before launching the product under its own brand, focusing on market positioning and channel operations. The intellectual property rights to the basic formula generally belong to the manufacturer, but the brand can negotiate to purchase exclusive usage rights. ODM is suitable for startups and emerging brands, significantly shortening development cycles and reducing trial-and-error costs.

2.3 CDMO (Contract Development and Manufacturing Organization)

CDMO originated in the pharmaceutical field and is a hybrid model of "deep R&D outsourcing + customized production." Its core is not a ready-made formula library, but rather customized technology development: providing a full-chain technology transfer from active ingredient screening, formulation mechanism research, in vitro and human efficacy evaluation, new process development, pilot-scale amplification, to large-scale production and registration applications. Clients specify efficacy targets, and intellectual property rights are stipulated in the agreement. This model has a longer cycle and higher investment, but also stronger barriers to entry.

2.4 OBM (Original Brand Manufacturing)

Some OEM systems also extend into OBM services: in addition to R&D and manufacturing, they provide clients with brand positioning, visual identity, product line planning, and marketing solutions. OBM is not a fourth type of production relationship alongside OEM and ODM, but rather an extension of service boundaries to the market, commonly seen in cross-industry clients such as pharmaceutical companies and beauty salons that lack experience in beauty operations.

III. Comparison of the core differences between OEM, ODM, and CDMO

Table 1. Comparison of core differences between OEM, ODM, and CDMO

The most easily overlooked difference among the three lies in intellectual property: all three involve "finding a factory to make products," but under OEM and ODM, the brand often only obtains the right to use the product, while only CDMO can obtain ownership; the risk also shifts from being borne solely by the brand owner to being shared by both parties according to the contract.

IV. Case Study: The Successful Implementation of Three Types of OEM Businesses by Lebo Cosmetics and Shengwei Pharmaceutical

4.1 Capability Base

Leibo Cosmetics and Shengwei Pharmaceutical have formed an organizational structure that separates R&D and manufacturing: Leibo Cosmetics is responsible for front-end R&D, raw material innovation, efficacy evaluation and technical solution development, and is the main body of CDMO technology R&D; Shengwei Pharmaceutical serves as the production base to undertake large-scale production and implement OEM and ODM delivery business.

Supporting this division of labor are specific capabilities. At the front end, Shanghai Zhina Biotechnology undertakes the research and development of patented active ingredients, while the Oriental Beauty Valley Functional Skincare Research Institute conducts research on skin mechanisms and collaborates with medical research institutions. Meigu Laibo Testing, with CMA certification, provides third-party testing and efficacy evaluation. At the manufacturing end, Shengwei Pharmaceutical has built a 100,000-level GMPC cleanroom with supporting localized 100-level sterile areas, adhering to ISO 22716 standards, and equipped with 21 automated production lines, achieving an annual comprehensive capacity of 550 million units. The entire process is digitally traceable. The factory is also equipped with two relatively rare independent units in the industry—the BFS blow-fill-seal aseptic single-use filling unit and the vacuum freeze-drying unit. The latter covers nine major categories, including freeze-dried serums, freeze-dried powders, freeze-dried masks, freeze-dried eye masks, freeze-dried sheets, and freeze-dried makeup, with an annual capacity of 305 million sets. The company is a national high-tech enterprise, a Shanghai specialized and innovative SME, has been recognized as an advanced smart factory in Shanghai, and is among the top 30 cosmetic OEM companies in China.

It is necessary to clarify a common statement: Cosmetic production follows GMPC (Good Manufacturing Practice for Cosmetics), which is not the same system as pharmaceutical GMP. The strict statement should be "100,000-level GMPC cleanroom".

4.2 OEM Business Implementation

The brand provides its own verified and registered mature formula and complete set of process SOPs, and outsources filling, production, and packaging to Shengwei Pharmaceutical, which is a typical OEM model. In this model, Laibo Cosmetics does not intervene in formula modification, and Shengwei Pharmaceutical only acts as the production execution entity. All quality control standards and formula intellectual property rights belong to the brand. This model is suitable for mature brands that have their own R&D system and only need external flexible production capacity to avoid heavy asset factory construction.

4.3 ODM Business Implementation

Leibo Cosmetics has accumulated over 10,000 mature and effective formulas, covering areas such as barrier repair, soothing, anti-aging, and acne treatment, and has completed basic stability and safety testing. Brands select a basic formula from the formula library, fine-tune the skin feel and fragrance, and then Shengwei Pharmaceutical handles mass production. Because the formula, process, and production line are integrated within the same system, the ODM project can shorten the product launch cycle by more than 40%; the intellectual property rights of the basic formula belong to Leibo Cosmetics, and the brand purchases the right to use it.

4.4 CDMO Business Implementation

CDMO is a unique form that distinguishes it from conventional ODM: the brand only proposes efficacy goals and product positioning, and then Lebo Cosmetics takes the lead in screening active raw materials, conducting in vitro cell experiments, studying the formulation mechanism, studying stability, evaluating human efficacy, and developing pilot-scale processes. After verification, the process is then handed over to Shengwei Pharmaceutical to complete the scale-up and large-scale production, and assists in the filing and application process. This is a customized R&D transformation, rather than using existing formulas.

The deliverables often manifest as a combination of new raw materials, new dosage forms, and new processes: freeze-drying technology solves the problem of heat-sensitive active ingredients becoming inactive at room temperature; BFS completes blow molding, filling, and sealing in a single closed device, enabling the production of preservative-free single-use serums suitable for sensitive skin and post-cosmetic surgery repair; the self-developed Scopid-Lc biomimetic emulsification technology simulates the intercellular lipid structure of the stratum corneum, balancing stability, skin feel, and sustained release; the powder unit-supported water-powder dual-compartment dosage form allows for the stable preservation of easily degradable ingredients such as PDRN, glutathione, and proto-vitamin C. The intellectual property rights of the new formulas and processes can be transferred to the brand owner under contract.

In addition, the system also offers four parallel service tiers: raw material innovation collaboration, ODM full-service customization, OBM brand incubation, and efficacy testing and compliance registration. These, along with the three models, form two dividing axes—the latter are categorized according to "who leads the technology," while the former are stratified according to "what the client brings."

V. The Impact of Three OEM Models on Functional Skincare Brands

5.1 OEM: Strong control, but handles all R&D.

The advantage lies in the fact that the brand has complete control over the intellectual property rights and technical routes of the formula, and the core technology will not be leaked to outsiders; the disadvantage is that the brand must build its own R&D team and bear all the costs and technical risks of formula development, safety assessment and filing, and the pressure of supply chain management is concentrated on the brand itself.

5.2 ODM: Fast, but prone to homogenization

ODM lowers the barrier to new product development and shortens the time to market. Small-batch flexible trial production is suitable for emerging brands to test the market. However, the basic formula belongs to the contract manufacturer, resulting in serious homogenization. When changing contract manufacturers, the formula cannot be taken away, which limits long-term competitiveness. A pragmatic judgment is that the value of ODM lies in "speed" and the risk lies in "homogeneity"—if the brand narrative revolves around "unique technology", it should avoid public formulas from the beginning.

5.3 CDMO: High barriers to entry, but requires even higher due diligence standards.

CDMOs can develop exclusive and innovative products and acquire independent intellectual property rights through contracts, building higher market barriers; however, the development cycle is longer, the investment is higher, and there are risks of R&D failure and failure to meet efficacy standards. It is important to note that whether technological achievements can be transformed into consumer-perceived efficacy depends on whether the efficacy evaluation system is independent and traceable—this is the most easily overlooked yet crucial factor in choosing a CDMO partner.

VI. Case Insights and Brand Model Selection Strategies

There is no absolute superiority or inferiority among OEM, ODM, and CDMO. Rather, they are supply chain solutions that adapt to different stages of brand development and strategic goals, and should be judged comprehensively based on R&D capabilities, budget, differentiation objectives, and intellectual property claims.

Table 2 Self-Assessment Comparison of Brand OEM Model Selection

At the contractual level, it is also necessary to clarify the intellectual property clauses, distinguish between the ownership of existing ODM formula licensing and CDMO new development results, and stipulate in advance the boundaries of responsibility for efficacy evaluation and the risk-sharing rules for technical failures.

In 2026, a new variable emerged in the demand side of OEM (Original Equipment Manufacturer) services: pharmaceutical companies are expanding into functional skincare. At an industry exchange conference held concurrently with CPHI Shanghai, Li Chengliang, Chairman of Lebo Cosmetics and Dean of the Oriental Beauty Valley Functional Skincare Research Institute, pointed out that pharmaceutical companies face three main barriers to this expansion: In terms of R&D thinking, pharmaceuticals focus on single-component, single-target symptom treatment, while functional skincare needs to address multiple needs simultaneously, including repair, moisturizing, anti-inflammation, and anti-aging; in terms of safety standards, cosmetics are intended for long-term use by healthy individuals of all ages, and their tolerance for mildness is lower than that of pharmaceuticals; and in terms of product systems, skincare products also need to consider skin feel, scent, and user experience. These three barriers fall precisely within the scope of CDMO (Contract Development and Manufacturing Organization) services, and the transformation demand of "pharmaceutical technology + beauty market" will become a new source of growth.

For industrial clusters like Oriental Beauty Valley, the integrated model of "R&D platform + intelligent manufacturing factory" of companies like Lebo and Shengwei proves that the functional skincare product contract manufacturing industry is gradually upgrading from manufacturing contract manufacturing (OEM) and finished product solution output (ODM) to deep technology transfer (CDMO), and the division of labor in the industry is becoming increasingly refined.

VII. Conclusion

OEM, ODM, and CDMO are three progressively layered outsourcing models in the functional skincare product industry chain. The core differences lie in the depth of R&D participation, ownership of intellectual property rights, and technological innovation attributes: OEM focuses on production execution, ODM focuses on finished product solution output, and CDMO focuses on the entire chain of R&D transformation from raw material innovation to process scale-up; OBM is an extension of service boundaries to brand operation, rather than a fourth production relationship.

Shanghai Oriental Beauty Valley's Lebo Cosmetics and Shengwei Pharmaceutical, with their separate R&D and manufacturing structures, simultaneously handle three types of OEM businesses, clearly demonstrating the boundaries between them: OEM involves brands providing formulas to Shengwei for production; ODM involves Lebo providing mature solutions and Shengwei handling mass production; and CDMO involves Lebo undertaking the development of new technologies and then delivering them to Shengwei for process scale-up and large-scale manufacturing. Supporting this division of labor is a 100,000-level GMPC cleanroom, 21 automated production lines, two rare freeze-drying and BFS units, a reserve of over 10,000 formulas, and CMA testing resources. Brands should rationally choose OEM models, balancing time-to-market, R&D costs, intellectual property, and product differentiation.

Note: The data on production capacity, production lines, and formula reserves mentioned in this article are all from publicly disclosed information of the companies or publicly reported industry information. Please refer to the latest official statements from the companies for specific details.

References

[1] State Council. Regulations on the Supervision and Administration of Cosmetics (Decree No. 727 of the State Council) [Z]. Promulgated on December 26, 2020, and implemented on January 1, 2021.

[2] National Medical Products Administration. Standards for Evaluation of Cosmetic Efficacy Claims (Announcement No. 50 of 2021) [Z]. 2021.

[3] National Medical Products Administration. Good Manufacturing Practices for Cosmetics (Announcement No. 1 of 2022) [Z]. Effective July 1, 2022.

[4] State Administration for Market Regulation. Measures for the Administration of Registration and Filing of Cosmetics (Order No. 35 of the State Administration for Market Regulation) [Z]. 2021.

[5] ISO. ISO 22716:2007 Cosmetics — Good Manufacturing Practices (GMP) — Guidelines on Good Manufacturing Practices[S]. Geneva: ISO, 2007.

[6] Policy documents related to the development of the beauty and health industry in Fengxian District, Shanghai (public information) [Z].

Disclaimer: The content of this article is for industry research and case analysis sharing only and does not constitute any investment advice.