Food mixed with alcohol, is it permissible?

The legal ruling on this and similar issues is based on istihlak and istihala as well as on their effect on removing a substance's najasa [impurity], rendering it permissible for human consumption.
Istihala
Istihala means the transformation of a substance's properties resulting in the removal of its impure nature. There is a scholarly consensus on the purity of an intoxicating liquid if it spontaneously transforms into vinegar.

Imam Ahmed, in one of his opinions, and the majority of Hanafi and Maliki scholars maintained that istihala renders any impure substance pure. As mentioned above, there is no scholarly contention on the purity of an intoxicant that has spontaneously turned into vinegar. This is because istihala changes and completely transforms the impure nature of such a substance. Since Islamic law bases the description of impurity on the presence of certain properties, its description as impure no longer applies due to transformation in its essence. This opinion is based on the case of the purity of intoxicants when they are converted into vinegar, the purity of deer blood when it is converted into musk and the purity of a blood clot when it is converted into a piece of flesh [during gestation]. This is the opinion implemented for fatwa.

Istihlak
Istihlak means that the percentage of alcohol in a certain substance is so negligible that it does not lead to intoxication, even if a person drinks large amounts of it. A beverage is deemed prohibited for human consumption if the percentage of alcohol in it leads to intoxication whether or not it is drunk in little amounts. This meaning corresponds with the hadith narrated by Jabir (may God be pleased with him) in which the Prophet (peace and blessings be upon him) said: "Any drink that intoxicates when taken in large quantities is unlawful both in small and large quantities" [recorded by Abu Dawud and Al-Nisa`i. Ibn Hibban declared it authentic from the hadith of Jabir (may God be pleased with him)]. This means that any drink that intoxicates is forbidden in small amounts because drinking small amounts of it that do not intoxicate may lead to drinking large amounts that do. However, it is lawful to drink beverages that have been mixed with minute quantities of an intoxicating substance and which do not lead to intoxication even if drunk in large amounts. This does not come under this hadith and its like.

The aforementioned impermissibility applies if we consider alcohol impure. However, Sheikh Mohammed Bekheit Al-Miti'i, the grand Hanafi imam and former grand mufti of Egypt, verified the matter and issued a fatwa stating that chemical alcohol is not considered wine in the first place. Accordingly, it is pure unless it is derived from wine.

Najasa is a legal issue and not a chemical fact in the sense that the impurity of khamr [intoxicating beverage] is determined by Islamic law. It is a chemical fact that alcohol is the intoxicating element in alcoholic drinks. However, this does not necessarily render alcohol impure or prohibited if it is found in any liquid other than khamr. This is because the impurity of a compound does not necessitate the impurity of its elements. The impurities upon which there is consensus such as human urine and stool consist of chemical elements which can be found not only in pure entities but also in food and drink. However, the najasa and filth of these substances are caused by the composition of certain constituents in a certain percentage.

Fermentation is caused by the presence of sugars without which the process of fermentation is impossible. Fermentation is the conversion of sugar into alcohol and carbonic acid. Thus, the fermented liquid becomes an intoxicant due to the presence of alcohol. Pure alcohol is not an intoxicant, but it is harmful to health. Drinking pure alcohol causes either slumber or brain damage.

To convert alcohol into khamr, it must be mixed with 3 times its amount of water then distilled at which time it is converted into an intoxicant. The addition of water gives khamr intoxicating properties. The reason behind the variety of intoxicants depends on the differences in the intoxicating effect resulting from the ratio of water and alcohol. Arrack contains 40% alcohol or more. Other kinds of alcoholic drinks contain 10% alcohol. Fiqa' which is derived from barley contains 5% alcohol and so forth. Pure alcohol is a poisonous substance and does not is not intoxicating unless it is mixed with water.