Another reason is taxes. Taxes on ethanol are quite high. However taxes on flavorings are a lot lower or not existent. Many flavorings only dissolve in ethanol so they use an ethanol carrier. (I was once told that Red Bull is .35% alcohol from the flavorings)

So when you’re making a really cheap alcohol you’ll add a lot of “flavorless” flavorings that use ethanol carriers. The total alc % doesn’t change, it’s still 35 or 40% or whatever, but a portion is from non taxable flavor. The more you add, the less taxes and the cheaper that plastic bottle of Vlad The Impailer Vodka direct from St Petersburg (Florida) can be. Those flavors even though they aren’t meant to, change flavor and also massively increase hangovers.