Transaction costs are a large proportion of the cost structure along the value chains of most industries, especially the food and beverage industries. Competition forces industries to structure their value chains to minimise transaction costs but, in agriculture, this process is commonly impeded by government intervention. In Australia, this has resulted in severe distortions to the structure of most agricultural industries. The wine industry, particularly in South Australia, has avoided or overcome these distortions more effectively than most and its current international competitiveness is the result. The paper proposes an analytical framework for assessing industry structure, describes the Australian wine industry in those terms and draws implications for other food and beverage industries.