Skincare Brand H2O+ Set To Close

Pola Orbis-owned H2O+ will close at the end of the year.

The skincare brand announced the impending cessation of its business on its website and social media channels. It wrote, “Thank you for your support throughout the years, and even more for allowing us to be a very small part of your daily routine. It’s been an incredible journey.”

In recent years, H20+ struggled to capture mind and market share in the beauty industry as it shuffled through a series of rebrands with the intent of drawing new audiences to its concept, which brought playful product formats to American consumers decades prior to them becoming familiar with inventive formulas manufactured in South Korea and Japan. H2O+’s blue Hydration Oasis Refreshing Gel Moisturizer has been the brand’s signature product since it started.

“There’s been so many famous and popular brands that have copied that product, it ranges from Neutrogena all the way to Tatcha,” says Pure Culture Beauty CEO and co-founder Joy Chen, who was CEO of H2O+ from 2015 to 2017. “I really feel like they were way before their time, and the brand had a really good following behind it and this product.”

Best known for its blue Hydration Oasis Refreshing Gel Moisturizer, skincare brand H2O+ announced on its website and social media channels that it will be closing at the end of the year.

Cindy Melk founded H2O+ as H2O Plus in 1989 at 27 years old. A Chicagoan, she had entrepreneurialism and the beauty industry in her lineage. Her father John Melk was a former executive at Waste Management, an early backer of Blockbuster and real estate investor. Her mother Janet Melk owned a spa called Kiva Spa.

Melk sensed there was a gap in the skincare category for a modernized natural beauty brand. “Everything that was naturally oriented was like a granola bar,” she told Chick Advisor in 2009. “Then I researched the skincare market as a whole and found that every cream was white, every package was opaque, there was no innovation in texture in about 100 years. There was so much incredible sameness. As a consumer that really irritated me but as a designer I thought, wow what an amazing opportunity.”

Epitomized by Hydration Oasis Refreshing Gel Moisturizer’s blue gel, Melk introduced color to skincare and a focus on moisture. H2O+ began with 100 products featuring purified water and imported seaweed. The brand amassed a large product portfolio of some 300 products by 2005, when, according to figures in the magazine Inc., it was generating $80 million in sales and had a workforce of 250 people. It also had 92 stores worldwide, and a lab, manufacturing facility and distribution center in Chicago.

Along with its playful, moisture-focused skincare, H2O+’s branded stores were integral to its proposition. “When I was growing up, I saw those stores almost everywhere. I saw them in San Francisco, New York, Chicago,” recalls Chen. “I still remember, after they opened their stores, those type of stores really took off.”

“I really feel like they were way before their time.”

In 2008, investment firms Cordova, Smart & Williams LLC and Goldman Sachs Urban Investment Group acquired H2O+ from Melk. By 2011, H2O+ had 2,000 points of retail distribution in 22 countries, and Pola Orbis acquired it. The Japanese cosmetics company was looking to increase its global presence. In 2015, H2O+ moved its headquarters from Chicago to San Francisco. In a Chicago Tribune story about the move, Chen divulged the brand had been unprofitable for at least five years.

The rebrands that ensued didn’t do much to reignite the brand’s spark. Reflecting on the rebrands, Chen says, “When it comes to positioning and rebranding, brands that have a loyal following have to ensure that they retain the current customers as well as the new. It seems like such an obvious thing to say, but doing it is where the execution matters the most. It’s so important to not just go after the shiny person that you want and forget about who has been loyal.”

A particular loyal set of customers for H2O+ was gained via its amenity partnership with Disney resorts. On social media, those customers have been especially vocal about their disappointment in the brand’s shuttering. On H2O+’s Instagram account, a user named Amy Mooradian exclaimed, “One of the best perks of Disney resort stays are your wonderful products! They will be missed!”

Junko Gomi, former senior manager in the global strategy division of Pola Orbis, became CEO of H2O+ in 2018. H2O+ exited retail to rebuild the same year. It continued with limited distribution on its website and Amazon, and at Disney resorts. H2O+ had previously been carried by Ulta Beauty, among several retailers.

Started by Cindy Menk in 1989, H2O+ was purchased by investment firms Cordova, Smart & Williams LLC and Goldman Sachs Urban Investment Group in 2008. In 2011, they sold it to Japanese cosmetics company Pola Orbis.

Talking to BeautyMatter last year, Gomi emphasized H2O+ was doubling down on clean beauty. Hydration Oasis Refreshing Gel Moisturizer was renovated to have a cleaner formula, and H2O+ worked with a Japanese lab with vast experience producing clean beauty products.

“The difficulty with clean beauty is there is no clear definition,” Gomi stressed to BeautyMatter. “So, by H2O+ choosing to work with a lab with an impressive legacy of making beautiful products we are confident we are delivering amazingly efficacious and ‘clean’ products. We believe in science and we are always challenging ourselves to innovate.”

Although Women’s Wear Daily’s Beauty Inc. top 100 list of beauty companies notes H2O+’s 2021 sales grew, Pola Orbis’s sales have been slowing lately. The company ranked No. 27 on the list for 2021. In its 2022 forecast, Pola Orbis predicts its net sales will drop from roughly $1.3 billion to $1.24 billion. Upon its closure of H2O+, the brand will enter an expanding field of beauty businesses that have gone extinct in the wake of the pandemic, supply chain difficulties and shifting consumer shopping habits.

Chen thinks H2O’s rocky history under Pola Orbis holds lessons for other acquirers or potential acquirers of beauty brands. “You really need to nurture what has made the brand successful and not ignore those,” she says. “You just acquired it, and you paid a lot of money for its value, and sometimes keeping and nurturing what you have received is just as important or more important than changing everything.”