Translation:They say they can make alcohol from water. I think they are bragging.
OK, got another question for you then: how do you make alcohol WITHOUT water? :)
If you're going to be picky "alcohol" is actually a class of compounds which doesn't include water. The class includes things like sugar and starch as well as the more familiar grain and wood alcohol, amng many others.
"Boasting" may be a better word. "Bragging" is obnoxious especially when it is true.
"rượu" mostly refers to wines and spirits, whereas a more general world like "alcohol" would translate to "cồn" (i.e. "rượu" này có 50% độ cồn = this "wine/spirit" has 50% alcohol)