Sacramental wine for both Christians and Jews, were explicitly not banned. In fact, churches and synagogues became some of the chief distributors of wine during the era. Communion wine "usage" skyrocketed.

This is all from my lecture on prohibition, and I apologize for not sourcing properly, but I don't have my citations for my lectures on me:

Another set of fascinating developments grew up around the exemption for “fruit juices.”

The idea here had been to continue to allow American farmers one of their favorite home-grown luxuries – hard cider.

But soon another fruit – the grape – emerged as the most important beneficiary of this exemption.

The CA wine industry had grown into a modest force by the time Prohibition hit, but most figured Prohibition would mark its end. Many grape growers ripped out their vineyards and replaced them with other crops like prunes or apricots.

But those who stayed in the grape-growing business soon found that Prohibition was a boomtime. Before Prohibition, wine grapes went for b/t $10-30/ton – by the mid-1920s, they were going for almost $400. What was going on?

The fruit juice clause in the Volstead Act had provided a huge opening for those who wanted to make their own wine, and regulations soon allowed a head of household to make up to 200 gallons of fermented fruit juice/year for family use. This was a particularly popular activity among ethnic Italians in the nation’s cities, and soon there was a huge trade of grapes in refrigerated rail cars from CA to the nation’s cities, where they would be offloaded, crushed for their juices, and then sold to those who would ferment the juices on their premises. There was nothing illegal about this.

While grape-growing boomed (though wine-making suffered, of course), the grapes planted changed – near Modesto, CA, Joseph Gallo began experimenting with a varietal called Alicante, and his sons Ernest and Julio pushed the change on the family’s lands. Soon others were grafting Alicante grapes onto established vineyards. The Alicante was a truly terrible wine grape, but it was highly productive, it survived shipping, and its dark flesh produced liquid that could be pressed several times as well as watered down. Add some sugar to it, and it fermented nicely, though it tasted like crap. But taste wasn’t the issue.

As a result, wine consumption boomed during Prohibition – in fact, by 1925, it was at more than double 1917 levels.

Through the Alicante grape boom, vintners had suffered, but they soon realized than another loophole would be their salvation.

In CA, the Wente Brothers and George Le Tour found a deep market with the church – they kept their old vines and and made decent wines, an they found willing buyers in the Catholic Church, providing them with sacramental wine.

]By 1922, Le Tour was storing almost a million gallons of wine on his property and shipping it east, all legally with a govt permit. Indeed, the Catholic market allowed these vintners to move a lot of wine without having to market it.

But observers soon noted that there was a lot more sacramental wine being produced and sold than was being consumed by the small sip in masses across the country.

And these growers found another market with American Jews, who also consumed wine for religious reasons – and, like Catholics, had not supported prohibition (KKK, etc.)

Indeed, soon there were all sorts of “Rabbis” buying this wine, including some named McGuire and Hollihand

Obviously, a lot of this wine trickled out of churches and synagogues into the homes of congregants, only further increasing wine consumption. Indeed, it might be fair to say that Prohibition was a blessing for those in the wine business.

There was also a very hearty trade in liquor coming from drug stores and prescribed for medicinal purposes. Indeed, this was the one major exemption that allowed the sale of hard liquor for human consumption.

Before Prohibition was 6 months old, 15,000 physicians had applied for permits to prescribe hard liquor.

The usual prescription was one pint every 10 days, which were given out on govt issued forms

Pharmacists had been selling alcohol for decades – particularly in tonics that women often consumed. But the AMA had ruled that these tonics mostly had no medical usefulness. But two years into Prohibition, the AMA changed its mind and the liquor started flowing from pharmacies, and pharmacists loved it.

All sorts of new “drugstores” popped up, many of them not even bothering to sell anything else but liquor. Indeed, some of them were merely refashioned saloons.

Other pharmacists created empires from this trade, such as Chicago’s Charles Walgreen – he went from 9 stores in 1916 to 525 by the 1920s – some have seen this as the result of his introduction of the milkshake to the American consumer, but whiskey had more to do with it.

Moreover, early appreciators of the power of this loophole did well by buying up distillery at fire sale prices and refashioning them as legal producers of medicinal alcohol. A Chicago lawyer named George Remus was the supreme entrepreneur in this market – he snapped up all sorts of distilleries, including Jack Daniels.

Not every state allowed this medicinal trade – 12 outlawed it and some enforced it closely. But in other places where the stomach for enforcement did not exist, it was a sham. Like medical marijuana.

Another important loophole was the allowance of alcohol manufacturing for industrial purposes. Most of it had to be denatured before sale, but that was easy enough to reverse. Soon, those with special permits to withdraw alcohol from manufacturers for approved uses were shunting some of this into an illegal trade for consumption. Philadelphia was in particularly good position to take advantage of this trade, as it had many of the producers nearby – Delaware’s DuPont Corporation in particular – and organized crime figures ready to step into the trade.

The brewers initially thought that there were no loopholes that they could exploit, and so they switched over to making “near beers,” which they initially marketed with some success but which then bottomed out. AB marketed a “cereal beverage” called Bevo. But they then figured out that they could manufacture malt syrup or extract, which had no alcohol content, and sell it to consumers who could then ferment it into homemade beer by adding water and yeast. This got many brewers through prohibition.

As Auguste Busch put it, “we ended up as the biggest bootlegging supply house in the U.S.”

The Volstead Act, which was the law that actually banned alcohol, had an exception for sacramental wine. See this older thread and particularly the top comment by u/AncientHistory for details.