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I have two types of product in my store - one is wines and another is food/ grocery.

The shipping cost for wine is based table rates, while food/ grocery is based on a flat rate.

So when you order a food from my store, I don't want to show you the table rates.

And when you order a wine, I don't want to show you the flat rate as it is always at a lower rate.

But when you order a wine and a food, then you get the table rates.

So, how can I customize the Magento system to do this? Can this be configured in Magento?

When I create a new product, I choose Simple Product as Product Type for Wines. What about food then?

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From what I understand your problem reduces to "If there is a wine type product in the cart, don't show the flat rate and when you order only food type products don't show table rate."
Each shipping method model has a method called proccessAdditionalValidation. You need to rewrite the models Mage_Shipping_Model_Carrier_Flatrate and Mage_Shipping_Model_Carrier_Tablerate and implement this method. The method receives as parameter an object of type Mage_Shipping_Model_Rate_Request from which you can access all products.

so your method can look something like this:

public function proccessAdditionalValidation(Mage_Shipping_Model_Rate_Request $request)
{
    //get all cart items
    $items = $request->getAllItems();
    //loop through the items and check their type
    foreach ($items as $item) {
        $product = $item->getProduct();
        //on the table rate model use this
        if ($product is of type wine) { //replace this with your code that checks if product is of type wine
            //so if there is at least one wine product then show the method
            return $this;
        }
        //on the flat rate model use this
        if ($product is of type wine) { //replace this with your code that checks if product is of type wine
            //so if there is at least one wine product then don't show the method
            return false;
        }

    }

}
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