Customer Demands Locally. Valvoline Also Utilizes Its Digital Infrastructure

customer demands locally. Valvoline also utilizes its digital infrastructure and technology to more efficiently interact with customers, driving customer engagement to deliver growth, customer retention and acquisition. Valvoline uses a variety of marketing techniques to build awareness of, and create demand for, Valvoline products and services. Valvoline advertises through social and digital media, as well as traditional media outlets such as radio. Valvoline selectively sponsors teams in high performance racing, including a current National Association for Stock Car Auto Racing ("NASCAR") sponsorship of Hendrick Motorsports, featuring the 2020 NASCAR Cup Series champion, Chase Elliott, and drivers, Jimmie Johnson, William Byron and Alex Bowman. In addition, Valvoline sponsors other teams and players, including 2020 Europa League champion, Sevilla Fútbol Club, which plays in La Liga. Research and development Valvoline research and development focuses on new, unique, and innovative products and services to meet current and future customer needs. These products and services are discovered using Valvoline’s unique “Hands on Expertise” innovation approach, which promotes a deep insight of customer requirements, allowing a high innovation success rate. Novel ideas are vetted using mathematical modeling from first principles when applicable, and the technology team works with the business through commercialization to ensure a positive customer experience. Regional technology centers in the Americas, EMEA, and Asia Pacific regions also locally develop appropriate solutions for vehicle and equipment maintenance and manufacturing in their markets. In addition to its own research and development initiatives, Valvoline also conducts testing for other entities, which partially offsets its research and development costs by increasing asset utilization. Valvoline will continue funding research and development to continue deploying innovative, high-quality products and services, which enhances Valvoline’s competitive position. Intellectual property Valvoline is continually seeking to develop new technology and enhance its existing technology. Valvoline has been issued approximately 50 U.S. and 75 international patents and has nearly 25 U.S. and 85 international patent applications pending or published. Valvoline also holds over 2,500 trademarks in various countries around the world, which Valvoline believes are some of its most valuable assets. These trademarks include the Valvoline trademark and the famous “V” brand logo trademark, which are registered in over 140 countries. In addition, Valvoline uses various trade names and service marks in its business, including ValvolineTM and Valvoline Instant Oil ChangeSM, among others and including those for key products. Valvoline also has a variety of intellectual property licensing agreements. Valvoline owns over 900 domain names that are used to promote Valvoline products and services and provide information about the Company. Raw material supply and prices The key raw materials used in Valvoline’s business are base oils, additives, packaging materials (high density polyethylene bottles, corrugated packaging and steel drums) and ethylene glycol. Valvoline continuously monitors global supply and cost trends of these key raw materials and obtains these raw materials from a diversified network of large global suppliers and regional providers. Valvoline’s sourcing strategy is to ensure supply through contracting with a diversified supply base while leveraging market conditions to take advantage of spot opportunities whenever such conditions are available. Valvoline leverages worldwide spend to pursue favorable contract terms from global suppliers and utilizes regional providers to ensure market competitiveness and reliability in its supply chain. Valvoline also utilizes the Company’s research and development resources to develop alternative product formulations, which provide flexibility in the event of supply interruptions. Valvoline closely monitors the Company’s supply chain and conducts annual supply risk assessments of its critical suppliers to reduce risk. Valvoline has a large manufacturing and distribution footprint in the United States, with seven lubricant blending and packaging plants and several packaging and warehouse locations. Additional blending and packaging plants are located in Australia, Canada, the Netherlands, and Serbia. Valvoline recently completed the construction phase of its first blending and packaging plant in China. The plant will have an annual capacity in excess of 30 million gallons of lubricants and coolants, with the initial testing phase beginning in the first quarter of 2021. The plant is currently on schedule for production to begin by the end of the calendar year 2020 and will be producing substantially all of the Company's lubricant volume for the China market by the end of fiscal 2021. Valvoline also uses numerous third- party toll manufacturers and warehouses both in the U.S. and internationally and is part of joint ventures that operate blending and packaging facilities in Ecuador and India. 10.

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