I always like Harold McGee’s explanation in On Food and Cooking: the shape of an ethanol molecule looks like water on one side and a fat molecule on the other side. It mixes really well with water, but it can also mix with fats a little bit. Fats don’t mix with water on their own. This makes it helpful mixing molecules that have flavors and tend to look more like fats into a mix that is mostly water (many foods and sauces), that they wouldn’t otherwise dissolve in.
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