The Invention of the Slurpee
J Thoendell stashed this in Food
Every year, 7,290,000 gallons of Slurpee are consumed worldwide -- enough to fill 12 Olympic-size pools. The beverage -- essentially frozen, flavored sugar water blasted with carbon dioxide -- comes in an unending flow of flavors and especially entices its suitors during the summer months.
But the icy treat has an intriguing history: it was discovered accidentally, became a staple of “cool kid” culture in the 60s and 70s, and has continued to thrive thanks to brilliant marketing (and occasional deliciousness).
In 1958, a Dairy Queen owner in Kansas inadvertently started what would become a beverage empire.
Omar Knedlik was an unlikely inventor: he grew up poor, fought in World War II, and subsequently purchased a few ice cream shops with his military pay. He did well for a while, but when a series of poor hotel investments whittled his finances, he cashed out, moved to Kansas, and took over a Dairy Queen.
Knedlik’s franchise didn’t have a soda fountain, so he began placing shipments of bottled soda in his freezer to keep them cool. On one occasion, he left the sodas in a little too long, and had to apologetically serve them to his customers half-frozen; they were immensely popular.
When people began to show up demanding the beverages, Knedlik realized he had to find a way to scale, and formulated plans to build a machine that could help him do so. He reached out to The John E. Mitchell Company -- a Dallas-based outfit that had previously made cotton cleaning equipment, but had “pivoted” into selling aftermarket automobile air conditioners. The company developed an interest in becoming an original equipment manufacturer (OEM), and agreed to help Knedlik with his vision.
Five years of trial and error ensued, resulting in a contraption that utilized an automobile air conditioning unit to replicate a slushy consistency. The machine featured a separate spout for each flavor (only two at this point), and a “tumbler” which constantly rotated the contents to keep them from becoming a frozen block.
Initially, Knedlik thought to name his product “scoldasice” but when an ad-man friend persuaded him otherwise, he hired a young local artist, Ruth E. Taylor, to do branding.
Taylor coined the “ICEE” name, and drew up a mock sketch of the iconic original logo -- four letters placed in blue and red boxes, adorned with ice (a feature that has remained unchanged today). She also conceived the idea to use a polar bear, though the goofy (but endearing) mascot used by Knedlik was eventually developed by Norsworthy-Mercer, an external ad agency.
Taylor’s designs were modified and finalized by a staff artist at Mitchell Company (the machine manufacturer), and the ICEE company formulated a business plan. For a rental fee, businesses could license a specified number of ICEE dispensers and have exclusive distribution rights in their territories.
By the mid-1960s, 300 companies had ICEE machines in operation; 7-Eleven was one of them.
7-Eleven licensed ICEE and rebranded it Slurpee.
Since 1967, 7 billion Slurpees have been sold.
Slurpees are good business:
Each month, 13 million Slurpees are consumed around the world. At an average price of about $2 (USD) per drink, 7-Eleven makes around $300-350 million in Slurpee revenue each year. Not bad, considering the hypothetical cost of making one.
Andrew Boydston, an ex-convenience store manager, says Slurpees carry an attractive gross margin:
“As store manager, I read the labels coming off the delivery truck, and was able to see what was contributing to the store’s gross product margin. Those Slurpees came in at an astounding .18 cent cost factor, selling for a 1.99 per cup -- that's what made the store money. (By contrast), those lousy Vienna sausages in a tin were sold for $1.99 and made the store only an 18% profit margin, or 36 cents on a $2 purchase.”
As a company, 7-Eleven has historically done very well. In 1971, they reported their first $1 billion sales year; only eight years later, they had their first $1 billion sales quarter; in 2002, they saw $10 billion in annual revenue. Over the last decade, the company has exploded in growth: they went from 20,000 stores in 2003 to over 50,000 in 2013; today, a new 7-Eleven opens nearly every two hours, and revenues are estimated at $77 billion.
The Slurpee may be just a blip on the company’s financial radar, but it seems to be a highly profitable one.