There's a few things going on in this question I'll address, but the short answer is generally no, the government did not work to keep those businesses afloat, nor did it offer them any parting gifts as an apology. It would have been odd for the government to declare their business anathema to a structured and ordered society and then pay them reparations for supposedly doing such awful things. But one thing I want to discuss in a little more detail is the phrasing of the question. Specifically, anything due to their industry now being illegal and essentially forcing their shutdown. Because this isn’t really universally true. I’m going to walk through a few different sectors of the American alcohol economy, and the effects of Prohibition on those sectors, and I think you’ll find that it wasn’t necessarily a pure loss for everyone involved.

First, let’s talk beer. Near and dear to my heart, beer had been undergoing a process of centralization, which I talk about in detail here (including this bit, so if you read this longer response, you can skip this paragraph). Essentially, beer in the United States looked similar before Prohibition as it looks now, with a few giants and a bunch of smaller, local outfits that really don’t have the structure to do large, national production. The main difference is that the big boys at that time were gaining market share and consolidating their dominance in the market, while currently the smaller breweries are growing in popularity. These large breweries (Anhueser-Busch, Schlitz, Blatz, Miller, Yuengling etc) had been lobbying against Prohibition for pretty obvious reasons, but felt strongly upon its enactment that the law wouldn’t stand. They did two things with this information: first, they converted to producing malt syrup, which, when mixed with water and left alone in a bucket, would ferment, making beer. Malt syrup was perfectly legal to sell, and home fermentation was not banned under Prohibition, so people could legally ferment their own beer as long as they didn’t sell it (which they did, also, but that bit was illegal). The second thing the Beer Barons did was begin to approach all of those smaller breweries and start offering to buy them out. For a smaller outfit that didn’t have the cash reserves to make it long on malt syrup, these offers were widely accepted, and the Barons acquired more equipment, more breweries, and hastened the exit of hundreds of breweries from the market. When Prohibition ended, they found themselves in a convenient position to turn out millions of barrels of beer in very short order, as they simply converted their production line back to beer. The nearly endless demand led to shortcuts, and the production of the American macro-lager that gets so widely panned today.

Next up, the big winner of Prohibition: wine. America as a country has few climates suitable for really great wine grapes in the French and Italian traditions, but the population rush to California had led several individuals with experience with wine to recognize the potential of the region for vineyards. The industry was still near infancy when Prohibition took off, and similar to the malt syrup produced by brewers, people with large amounts of grapes found an even easier product: grape bricks. A bunch of dehydrated, ground up grapes mixed with sugar and yeast, and a bunch of warnings that customers should absolutely NOT leave in a bucket with water or it would produce a VERY DELICIOUS WINE with a high, horrible ALCOHOL CONTENT, that would reach peak drinkability at about X weeks. Shockingly, most people completely disregarded those instructions and used their grape bricks almost exclusively to produce wine. Demand for grape bricks was much higher than demand for American made wine had ever been before, as it was the easiest of the Prohibition loopholes to exploit. Vineyards had a lot of time and resources to cultivate after that. When Prohibition ended, they struggled with sales once more, however, despite turning out high quality wine, a status that wouldn’t end until the Judgment of Paris. Grape bricks weren’t the only trick: sacramental wine was still very much legal to make and sell, and many members of the clergy found a new way to earn donations to their churches and temples. It should also be noted that there was a cost to this progress: nearly 150 million gallons of wine was basically panic-purchased in the months leading up to Prohibition. This sounds like a great thing, but a lot of this was very young wine, and for both wine-making and distilling, there’s a certain cost to creating your first aged stocks. Losing all of that aging stock would require the vineyards to completely reset and start over, though they now had the resources to do so.

The obvious third choice is distilling. Whiskey, oh my whiskey, heart and soul of American liquor! One of the major appeals to America to European immigrants was the vast tracts of arable land that had not been settled. Cereal grains grew in America in huge quantities, and turning them to whiskey was a great way to increase their shelf life, and decrease logistical costs. Distilling was a boom industry in the United States, and that’s not even discussing the sale and consumption of imported rum. Distillers had the same malt syrup option as brewers, but had a few other options as well. Liquor, particularly whiskey, was still prescribed by pharmacists medicinally. Many pharmacists would take offers from organized crime to begin dispensing such prescriptions for pay, and, amusingly, some bars would even become licensed pharmacies. Where did this medicinal whiskey come from? Well, this is where Prohibition’s status as pork-barrel politics rears its head. There were nearly 200 million cases of whiskey in bonded warehouses around the country. If Prohibition agents were to come in and destroy all of that whiskey, because it was bonded, the banks that insured those warehouses would have to pay for that whiskey. Further, many of the people who wanted Prohibition actually wanted Prohibition for other people. Racists wanted to stop black people from drinking it, capitalists wanted to keep their workers dry, and some just wanted to make alcohol an upper class thing. Many of these forces, then, created a withdrawal permit system, where these 200 million cases of whiskey would be slowly doled out for sale as medicine, thus protecting the backstocks of whiskey produced before the Volstead Act. And by slowly, I mean at the pace of 4 million gallons per month.

Bitters, a cocktail ingredient commonly between 15-20% ABV, was dispensable by pharmacists without a prescription, and one bar in Door County, Wisconsin, began production of their own house bitters to go along with their pharmacists’ license, to serve straight bitters to those willing to endure the taste.

Speaking of taste, there were the various illegal operations as well. Bathtub gin being sold to speakeasies, and the golden age of the American cocktail as speakeasies desperately worked to cover the taste of poorly made (and sometimes dangerous) liquors. Smuggled liquor, especially scotch and rum, skyrocketed, as America faced a huge uptick in smuggling by sea. Some argue that this was a bigger source of distress for distillers in particular than Prohibition was.

But, the long and the short of it is this: while the government made no provision to protect the business or finances of those in the alcohol sector, many survived, and some even thrived. There were a million ways to evade the ban, and a hundred lasting effects of Prohibition on American society, from the Midwestern Friday Fish Fry to the rise of California wines, to the general low quality of American macro-brewed beer.

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Sources:

(1) A Concise History of America’s Brewing Industry: Economic History Association

(2) Liberated Spirits; Hugh Ambrose and John Schuttler

(3) Last Call: The Rise and Fall of Prohibition; Daniel Okrent

(4) Prohibition and its Effects: Lisa Anderson

(5) USA Today: 40 years ago, Calif. wines beat France and changed the world, Rhonda Abrams

(6) Cosmopolitan, January, 1922: link to this edition, scanned