I'm pretty sure the point is that distillation for fuel doesn't remove all the aldehydes (and other stuff?) that distillation for rubbing alcohol would normally entail. One more trip around in the still (or however the heck continuous distillation works) would probably make the product work fine.

One assumes they're trying to sell alcohol that was originally destined for use in fuel (since we're idiots and we put alcohol in gasoline) for another use, since the demand for fuel alcohol cratered and the demand for rubbing alcohol skyrocketed.