California's long-running effort to crack down on sugary alcoholic beverages popular among young drinkers apparently has fizzled.

Faced with higher state taxes last Oct. 1 and a new labeling law set to take effect Thursday, Mike's Hard Lemonade, Smirnoff Ice and other big players in the flavored malt beverage industry simply changed their recipes to avoid the new legal requirements.

"All the leading products have been reformulated," said Marc E. Sorini, a Washington, D.C., lawyer who represents the industry. "The only economic impact is higher costs in the industry that may or may not be passed on to the consumer."

The results: Taxes on the drinks derided as "alcopops" and marketed as starter drinks for young people will remain the same as beer – about 16 times less than the tax on distilled spirits. And a new law supporters thought would help clearly identify the drinks as alcoholic will not apply to the reformulated beverages.

"It is disappointing, but the mere fact that it brought the issue on the radar screen for a lot of policymakers is good," said Michael Scippa, advocacy director for the Marin Institute, a nonprofit watchdog of the alcohol industry. "It's not like the problems are going to go away overnight just because the products have been reformulated."

Critics who say flavored malt beverages are aimed at young drinkers launched an effort more than three years ago to have the drinks taxed at the same level as liquor – $3.30 a gallon – rather than at the beer rate of 20 cents a gallon.

The tax issue sputtered in the Legislature, but the Board of Equalization this year approved the higher tax to begin Oct. 1.

"It will send a signal to youth that alcopops are hard liquor – because these drinks will now have costs that are similar to hard liquor," board Chairwoman Judy Chu said at the time. "It will make it harder for young people to access alcopops, and that can only be helpful in reducing underage drinking."

Lawmakers and Gov. Arnold Schwarzenegger followed the board's action by approving Assembly Bill 346, which requires each bottle or can to bear a large label in capital letters that warns consumers the drink contains alcohol.

Both issues have been heavily lobbied at the Capitol. Mothers Against Drunk Driving, the Marin Institute and the Girl Scouts roamed the hallways against the products, arguing that the sweet-tasting drinks pack a punch and are aimed at the youngest drinkers, legal and otherwise. They faced a well-heeled beer and liquor industry that contends the drinks are a type of beer – with the same 5 percent alcohol content – and are marketed legally and ethically to all of legal drinking age.

After months of negotiations, the labeling bill cleared the Legislature by healthy margins in August.

"It took two years, but I was fortunate to have a wide base of support," said Assemblyman Jim Beall, the San Jose Democrat who pushed AB 346. He said the Girl Scouts were the most effective lobbyists. "A lot of these (legislators) have little girls at home, and they were looking at it from that standpoint – as a mother or father. The Girl Scouts got to them."

Beall and other supporters claimed that some customers – including parents – buy the drinks unaware that they contain alcohol. Beall's bill specifically requires the words "CONTAINS ALCOHOL" to appear in capital letters at least 3 mm (0.12 inches) high on the front of each container.

Industry representatives said the labeling bill was unnecessary, noting that federal law requires the alcohol content to be printed in the bottle. Besides, Sorini said, "No one's picking up Smirnoff Ice thinking it's a soft drink."

But while the labeling bill was being negotiated in the Capitol this year and state regulators were preparing for the new taxing plan, the industry found a new way to mix the drinks.

The industry says the new formulas fall outside the definition laid out by the tax board and the labeling legislation, which applied to drinks that derive 0.5 percent or more of their alcohol content from flavorings containing distilled spirits.

The exact method is complicated – and a proprietary trade secret – but industry representatives say the reformulated drinks derive their alcohol less from flavorings and more from the brewing process.

"Our technical team made sure that our product looks and tastes the same as the other formulation," said Zsoka McDonald, a spokeswoman for Diageo PLC, makers of Smirnoff and one of the biggest industry players. "Consumers can't notice a difference."

A Web site maintained by the state Board of Equalization shows all the major brands filed for and received an exemption from the higher tax as of the Oct. 1 implementation date.

As a result, the $38.3 million more in revenue the board had estimated the higher tax would bring in is not likely to materialize.

Tax data for the first two months are preliminary, said tax board spokeswoman Anita Gore, but "we believe the total to be somewhat less than our original estimate based on the number of beverages on the (exemption) list."

Scippa of the Marin Institute acknowledged the 0.5 percent threshold "was perhaps a weakness in the way the language was written," but he remains skeptical that companies really changed their formulas.

"I would just like to see verification that the reformulation is accurate," he said.

Chu, the tax board chair, said she would push for an agressive verification process "to follow through with the true spirit of the regulation," although it is unclear if the state's cash-strapped budget could afford such an effort.

Beall's labeling bill will take effect Thursday as planned but will likely have little effect on what words appear on the bottles.

A few manufacturers of the flavored malt beverages may comply voluntarily, but the new law will not apply to those who changed the formulation of the drinks.

"Any labeling change we make would incur costs, so if we don't fall within the law, we would not take the steps" to change labeling, McDonald said.

Call Bee Capitol Bureau Chief Dan Smith, (916) 321-5249.