TECHNOLOGY FOCUS - INORGANIC CHEMISTRY - Preferred Components: The slurry catalyst comprises a poison-tolerant catalyst comprising a sulfided catalyst.    TECHNOLOGY FOCUS - INSTRUMENTATION AND TESTING - Preferred Components: The biomass conversion system further comprises a solids introduction mechanism coupled to the top of the hydrothermal digestion unit. An exit of the fluid conduit or second fluid conduit is operably connected to a flow dispersal system in the upper portion of the hydrothermal digestion unit.    TECHNOLOGY FOCUS - ORGANIC CHEMISTRY - Preferred Method: The method further comprises: supplying upwardly directed fluid flow through the cellulosic biomass solids; at least partially depolymerizing the lignin in at least a portion of the phenolics liquid phase; before or after partially depolymerizing the lignin, separating the phenolics liquid phase from the aqueous phase; after depolymerizing the lignin, removing the slurry catalyst from the phenolics liquid phase; and separating the portion of the phenolics liquid phase from the aqueous phase. The phenolics liquid phase and the slurry catalyst are conveyed external to the cellulosic biomass solids. The alcoholic component is formed by a catalytic reduction reaction of soluble carbohydrates, where the soluble carbohydrates are derived from the cellulosic biomass solids. At least a portion of the slurry catalyst is upwardly conveyed by the upwardly directed fluid flow into at least a portion of the cellulosic biomass solids. The upwardly directed fluid flow passes through the phenolics liquid phase. In the method, after being released, the phenolics liquid phase and the slurry catalyst downwardly percolate through the cellulosic biomass solids, or the phenolics liquid phase forms droplets containing the slurry catalyst that downwardly percolate through the cellulosic biomass solids. The heating step takes place in a hydrothermal digestion unit comprising a fluid conduit for conveying the phenolics liquid phase from a lower portion of the hydrothermal digestion unit to a location above the portion of the cellulosic biomass solids. The fluid conduit conveys the phenolics liquid phase to an upper portion of the hydrothermal digestion unit and to a location above the portion of the cellulosic biomass solids at a location before the cellulosic biomass solids are introduced to the hydrothermal digestion unit. The step of conveying and releasing the portion of the phenolics liquid phase and the slurry catalyst comprises circulating the phenolics liquid phase through the cellulosic biomass solids. Preferred Components: The alcoholic component comprises a monohydric alcohol, a glycol (preferred) and/or a triol. The upwardly directed fluid flow comprises: a gas stream and/or a liquid stream; and a stream of the aqueous phase and/or the phenolics liquid phase.