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Why does pastis turn white when you add water?

Pastis is a French alcoholic beverage that contains aniseed oil. It can be drunk straight or diluted with water. When water is added to pastis or similar drinks the drink turns white. The aniseed taste of these drinks is caused by aniseed oil used as flavouring in the drinks. This oil does not dissolve in water, but does in alcohol. In particular anethole, the substance responsible for the typical aniseed flavour, is hardly soluble in water. However, it does dissolve very well in alcohol.

The beverages contain approximately 40% alcohol, enough to dissolve the aniseed oil. When the beverage is diluted with water the oil is no longer soluble. This causes tiny droplets in the beverage, which create the white colour. Further dilution will at first not reduce the colour. As less oil will dissolve upon dilution, more droplets will be formed. Only at great dilution will the white colour get less.