The only thing left for the University of Oklahoma was the Gatorade shower.
As the clock ticked down in the 4th quarter of the 2020 Cotton Bowl football game against the University of Florida, 2 Oklahoma players snuck behind head coach Lincoln Riley with a heavy orange cooler and lifted it over his head, and soaked him with Gatorade.
Per one of the most enduring traditions in college football, Oklahoma’s 55-20 victory was official.
But despite the loss, Florida still had a reason to celebrate: Every bottle of Gatorade sold in the world — and every drop poured on unsuspecting coaches during football season — signals a win.
An undisclosed share of Gatorade’s profits flow to a Gatorade Trust. The trust then sends 20% to the university, which employed the professor who invented the drink nearly 60 years ago.
In 2015, Florida announced it had accumulated ~$250m from the royalties. Its annual take over the last few years has been ~$20m, according to the university.
These days, many universities cash in through IP policies that ensure they get the bulk of proceeds from anything invented by their staff. But that didn’t happen at Florida in 1965. Gatorade led to an expensive dispute between the inventors, the university, and the federal government.
Depending on how much credit you believe belongs to inventors or institutions, Florida’s cut from the sports drink is either way too much, or not nearly enough.
The experiment of a lifetime
Growing up in San Antonio, Robert Cade was the type of smart kid who chased a different kind of perfection.
“I played a game, how low a grade could I make and not fail,” he once told a researcher in an oral history about his life.
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A portrait of Robert Cade (Florida Inventors Hall of Fame)
Cade went on to study at the University of Texas, where he got his degree in 2 years, while working days at the library and nights at a gas station.
After medical school in Dallas, the University of Florida recruited him to be chief of renal medicine. He taught classes, saw patients, and used his leftover time on experiments.
And in the fall of 1965, a research fellow working under him, Dana Shires, proposed a challenge that had the makings of a great experiment.
Shires had heard from Florida assistant football coach Dewayne Douglas that the team was struggling late in games. The players always seemed exhausted, and they never urinated, despite sweating through their shirts.
Coaches at the time incorrectly believed fluids caused cramping, so the athletes at Florida did not drink water during practices or games.
Cade and his fellows (Shires, Alejandro de Quesada, and Jim Free) tested players for 5 days, discovering they were losing water and sodium and that their blood sugar levels were declining. The fix, they believed, was a simple water-based drink with ingredients they already had in their lab: salt and glucose, plus phosphate.
Coach Ray Graves let his freshman players drink the new concoction during a Friday scrimmage. It was so effective he asked Cade to make 100 liters overnight for a big game against Louisiana State University the next day.
Cade served the drink from 2 massive containers sitting in a red wagon on the sidelines. Feeling the heat, the players guzzled the Gatorade, dominated the 2nd half, and won 14-7.
Dr. Robert Cade, whose team of researchers invented Gatorade in 1965, pours some Gatorade for UF football players (Lynn Pelham / Sports Illustrated / Getty Images; via Gatorade)
Over the ensuing 2 years, the drink produced similar results: Florida would ride a wave of late-game energy to win football games.
Their recipe for success wasn’t much of a secret.
A few schools had already been making similar beverages, notably in-state rival Florida State University’s “Seminole Water.” According to the Gatorade book First in Thirst by Darren Rovell, a University of Nebraska athletic trainer came up with a sports drink called Huskerade in 1964.
But history is written by the victors, and Florida was a winner.
In the wake of the team’s Orange Bowl appearance in 1966, Neil Amdur, a sports writer for the Miami Herald, wrote a column about Gatorade, the team’s magical sports drink. The story hit the wire and was published in newspapers throughout the US.
Gatorade was about to blow up — and so was the inventors’ relationship with the university.
Florida’s massive mistake
The deals started out small. A high school team wanted a batch of Gatorade, as did boxer Jerry Quarry and the Cystic Fibrosis Foundation.
But as more and more newspaper articles circulated, Cade and his researchers realized they had a product that was even better than the Florida football team.
Journalist Neil Amdur’s story after inquiring about what Florida’s football players were drinking on the sidelines. (The Miami Herald via Newspapers.com)
They didn’t know anything about business. Their first step, according to Cade and Shires, was going to the university.
Cade told Florida’s head of sponsored research and its university president that he believed every sports team in the country would pay to drink Gatorade. They were not impressed.
“[The head of sponsored research] said the University had no money for doing this,” Cade later recalled. “They had no one assigned to the job of developing products, so they were not interested.”
Cade pressed on anyway.
The professor took out a $500 loan (~$4k today) from the bank for bottling supplies and completed several early deals. In 1967, Indianapolis-based canned food company Stokely-Van Camp became interested.
Cade and his team wanted a $1m flat fee for the rights to the drink, according to First in Thirst. But Stokely balked, fearing Gatorade wouldn’t be successful enough for the company to recoup the investment.
So the inventors, who formed the Gatorade Trust, reluctantly agreed to a royalty structure of 5 cents per gallon sold.
This turned out to be a prudent business move: Gatorade’s 3 early flavors — grape, orange, and lemon-lime — quickly became a sensation.
The Gatorade Trust’s cut of the profits grew from $29k in its first year to $100k (~$768k adjusted for inflation) by year 3.
Cade in his lab (University of Florida Health)
Knockoffs entered the market immediately:
- The University of Georgia came out with Bulldog Punch
- The University of South Carolina had its own Gamecock Punch
But it was Gatorade that kept selling, and the Board of Regents at Florida realized the university had made a terrible mistake.
Cade was in Munich for a conference in July 1971 when he heard the news: Florida was filing a lawsuit for 100% of Gatorade’s royalties.
The 80-20 split
Back in the 1960s, university-related patents and products were nearly unheard of. Only 96 patents from 28 universities were granted in 1965, the year Cade’s research team invented Gatorade.
Most universities either didn’t believe in the financial payoff of their faculty’s inventions, or weren’t savvy enough to cash in on them. (In the ‘50s, for instance, Indiana University left tens of millions of dollars on the table in its deal licensing a fluoride compound to Procter & Gamble that was used in Crest toothpaste.)
Florida lacked a well-organized setup for handling innovation, and its lawsuit was shaky for 2 major reasons.
- Cade had not signed a contract required for faculty that gave Florida the rights to their inventions.
- Cade and his researchers were funded by the federal government through a National Institutes of Health grant, not the university. (Cade later placed the NIH’s contributions to Gatorade research at $42.70 — a total that included his lab’s electric bill.)
But Gatorade had been tied to the university through an early TV commercial featuring Florida coach Ray Graves.
Moreover, the name itself was linked to the University of Florida’s Gator mascot, and the early publicity Gatorade received, which separated it from similar drinks across the country, was sparked by the football team’s Orange Bowl success.
Zachary Crockett / The Hustle
Florida and the National Institutes of Health got involved in the same federal lawsuit against the Gatorade Trust, requesting delay after delay. Legal fees piled up. Florida’s lawyer warned the researchers that the university would eventually sue the Gatorade Trust in every state.
“[He said], ‘if you think you have spent a lot of money, just wait until you start defending in Arizona, New Mexico, California, Texas, Alabama, and so on,’” Cade later recalled.
The members of the Gatorade Trust were eventually going to be rich, but they weren’t rich yet, and they decided to settle.
The agreement gave the University of Florida 20% of the royalties. Cade said he and 4 other members of the trust each got 10% of the royalties, and another 42 members split the rest.
They all made more money than they ever could have imagined.
After the lawsuit and a purchase of Stokely-Van Camp by Quaker Oats, Gatorade’s popularity continued to rise, notching sales of $600m in 1990 for a 96% share of the sports drink market.
Florida went from having $237k in back-paid royalties in 1972 (from the first 5 years of Gatorade) to an estimated $250m in 2015. Based on the 80-20 split, the Gatorade Trust had made ~$1.25B in 2015 and has been making ~$80m annually in recent years.
Zachary Crockett / The Hustle
PepsiCo did not respond to a request for comment.
But even for a company pulling in billions every year, the royalties are no small fee to pay. And if Cade hadn’t made one very savvy move, the Gatorade Trust and the university would likely receive nothing today.
The importance of trademarking
Patents expire after 20 years, but trademarks are forever, as long as you renew them.
Cade knew this, and the registered trademark of Gatorade — originally filed by Stokely-Van Camp after making the deal with the Gatorade Trust — is the only reason PepsiCo owes royalties.
The company has not been able to get out of the arrangement, even as it has transitioned away from a Gatorade logo to ‘G’ the last several years.
“There was some wrangling over that: ‘Hey, you know, we may not have to pay you guys because it doesn’t say Gatorade,’” Jim O’Connell, Florida’s assistant vice president for technology transfer, told The Hustle. “But I’ll say it this way: They are paying us royalties on those products.”
Zachary Crockett / The Hustle
Florida has used its royalties to bolster its research and entice new researchers looking to make lucrative discoveries.
The university patents around 140 inventions each year and made ~$500m off licenses between 2008 to 2018, placing it near the top of the market. In 2018, the total licensing revenue from university-affiliated patents was ~$2.9B.
Still, Florida has occasionally considered what could’ve been, had it retained a more favorable agreement.
One university official lamented to the Los Angeles Times in 1990 that Florida’s take of Gatorade royalties could be 2-3x higher if it had been smarter and better organized. Per its new IP policy, the university can now assume ownership of any invention developed with its support; the inventor typically receives a 25% to 40% cut.
But the university mainly cherishes its ties to Gatorade and Cade. In 2007, he was inducted into its athletic hall of fame a few months before his death.
When Cade accepted the honor at a banquet in Gainesville, they did not shower him with Gatorade.
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