I know that ethanol is mixed with some ingredients as fennel which give to this its particular taste. Fennel and ethanol are mixed together. Ethanol is also mixed with water. The analogy is 60 percent water 40 percent ethanol.
When we add some water more the fennel gets free from ethanol and the drink takes its white color.
The question is why adding some water more changes the equilibrium between fennel and ethanol?
The ouzo/sambuca effect:
The ouzo effect, also known as the louche effect and spontaneous emulsification, is a milky oil-in-water emulsion that is formed when water is added to ouzo and other anise-flavored liqueurs and spirits, such as pastis, rakı, arak, sambuca and absinthe. Such emulsions occur with only minimal mixing and are highly stable.
Note the section about emulsion stabilization.
In a water-rich ouzo mixture the droplet coalescence is dramatically slowed without mechanical agitation, dispersing agents, or surfactants. It forms a stable homogeneous fluid dispersion by liquid–liquid nucleation. The size of the droplets has been measured by small-angle neutron scattering to be on the order of a micron.
Using dynamic light scattering, Sitnikova et al. showed that the droplets of oil in the emulsion grow by Ostwald ripening, and that droplets do not coalesce. The Ostwald ripening rate is observed to diminish with increasing ethanol concentrations until the droplets stabilize in size with an average diameter of 3 microns.
Based on thermodynamic considerations of the multi-component mixture, the emulsion derives its stability from trapping between the binodal and spinodal curves in the phase diagram. However, the microscopic mechanisms responsible for the observed slowing of Ostwald ripening rates at increasing ethanol concentrations appear not fully understood.
Fennel fruits/seeds contain various volatile aromatic oils that are significantly soluble in ethanol, but much less soluble in water.
When the ethanolic extract is diluted by water, the oil solubility in the ethanol/water mixture dramatically decreases and dissolved oils eventually separate, forming white emulsion.
This happens with many ethanolic plant extracts, used for medicinal or scented spirit purposes.
Quoting from the Fennel link:
It is a highly flavorful herb used in cooking and, along with the similar-tasting anise, is one of the primary ingredients of absinthe.
The aromatic character of fennel fruits derives from volatile oils imparting mixed aromas, including trans-anethole and estragole (resembling liquorice), fenchone (mint and camphor), limonene, 1-octen-3-ol (mushroom). Other phytochemicals found in fennel fruits include polyphenols, such as rosmarinic acid and luteolin, among others in minor content.
F. vulgare essential oil also has non-food uses. Pavela et al 2016 find the EO to be insecticidal.
I remember some empirical advice as natural repellent against ticks - carrying in pockets small fabric bags filled by fennel seeds.
