Origin of "cream" meaning "to defeat decisively"

Solution 1:

The Oxford English Dictionary writes that the relevant definition is:

transf. To deal with vigorously and with success, esp. to beat or thrash; to defeat heavily, as in sporting contexts; to ruin or wreck (a motor vehicle, etc.). colloq. (orig. U.S.).

It was first used in 1929, by the Princeton Alumni Weekly:

1929 Princeton Alumni Weekly 24 May 981/1 Say, if he opens his mouth, I'll cream him.

Note that they write this use is transf--the OED uses this to mean transferred sense. That is, another meaning of the verb cream was applied to a new situation. The OED writes that the associated meaning of cream is applied to baking:

a. To work (butter and sugar, yolk of eggs and sugar, etc.) into a creamy consistency.

This requires a fair amount of beating the butter and sugar together, and so the Princeton Alumni Weekly applied this action to a new situation.

Solution 2:

There is a procedure in cooking called "creaming butter" that involves beating the butter moderately hard for a long time. From a cooking website:

To beat one or more ingredients until the mixture is soft, homogeneous, and smooth, i.e. "creamy".

I always assumed that this was the basis of the metaphor "We creamed them", meaning "We beat them really, really well."