The other Asian giant

“INDIA wants to be like China, but does not like to admit it,” says Suhel Seth, a consultant based in Delhi. He is half right. Indians show no obvious hankering to be censored, silenced or deprived of the vote. But they would love to amass consumer goods the way China's middle class does. Chinese people are three times richer than Indians. The Chinese market for cars and many other sophisticated consumer goods is ten times larger than India's.

Yet in 10 to 15 years India's economy could be as big as China's is today. Its 1.2 billion people are getting richer fast. Unlike China's population, India's will stay young and energetic for years to come, so its growth rate could soon outstrip that of rapidly ageing China.

Plenty of consumer-goods firms are betting on India. Take Nestlé, the world's biggest food company. The Swiss firm has been in India for almost a century, long enough to get its corporate head around the subcontinent's extraordinary complexity—and also to spot some obvious things, such as Indians' love of milk.

Nestlé India runs seven factories, churning out everything from dahi (yoghurt) to chocolate bars. One of them, in Moga in the northern state of Punjab, started in 1961 as a small collective, with 180 local farmers supplying milk to the factory. The farmers were poor, so their beasts were weak—nearly two-thirds of calves died around the time of birth. Nestlé brought in vets, agronomists and other experts, who taught the farmers, among other things, how to irrigate their fields to produce better feed and healthier cows. Milk production has increased 50-fold.

Today Moga works with 100,000 farmers who bring their milk twice a day to 2,815 refrigerated collection points. The farmers are better off, their calves are stronger. Running one of these collection points, where the milk is tested and weighed, is a position of great honour. One collection-point manager, a tall Sikh in a pink turban, says his family is in Canada but he would not dream of quitting his job to join them.

Demand for dairy products is voracious, but supply is iffy because of India's awful roads and patchy chill chain (ie, it is hard to keep milk chilled from pail to lips). Helio Waszyk, the chairman of Nestlé India, admits that rising food prices keep him awake at night. He plans to invest $450m to double Nestlé's capacity by expanding existing dairy plants and building a new one in Himachal Pradesh.

With 1,500 dialects and a multitude of faiths, India is more culturally diverse than China. India's regions vary widely, too, from the richer, more literate areas around Mumbai and Bangalore to the poorer, less well educated states in the east. Mr Waszyk tries to find products that appeal to more or less everyone.

Nearly every Indian likes carbohydrates and spices, which is perhaps why Nestlé's Maggi two-minute noodles are universally popular. These snacks were launched with pedestrian flavours such as Masala and Chicken, and are now available with exotic ones such as Thrillin Curry and Tricky Tomato. Nestlé studies Indian tastebuds carefully. During “Project Epicure” five years ago, it made 1,500 visits to Indian homes, rich and poor, to see how people cook and eat. (A fresh survey, “Project Gastronomy”, is under way.)

Nestlé sells more packaged foods than any other firm in India. On July 30th Nestlé India reported a 20% increase in total sales, to 17.63 billion rupees ($394m) and a 9.8% rise in its net profit for the second quarter, to 2.14 billion rupees.

Not bad, but local rivals are chomping at its tail. Dabur, the biggest Indian consumer-goods maker, a family-owned firm based in Uttar Pradesh, has 55% of the market for fruit juice and cranks out truckloads of shampoo, skin cream and other health and personal-care products. It is one of the relatively few Indian consumer-goods firms that have expanded outside India.

After two takeovers of foreign firms, a quarter of its sales are abroad, chiefly in the Middle East and Africa. Sunil Duggal, Dabur's boss, thinks that as a company from an emerging market Dabur will do best in other emerging markets. Hence the recent takeover of Namaste Laboratories, an American firm that makes hair products for Africans and African-Americans. Dabur wants to expand in Africa. Mr Duggal smiles that a third-world company bought a first-world firm to crack another third-world market.

Hindustan Unilever, a subsidiary of the Anglo-Dutch consumer-goods colossus, is doing even better than Nestlé. On July 28th it reported that profit for April to June increased by 18%, to 6.3 billion rupees, beating analysts' expectations. Like Nestlé India, Hindustan Unilever understands the need to get close to the customer. Its “Project Shakti” recruited 45,000 poor rural women as sales agents, turning them into micro entrepreneurs. These women perform a useful public service by teaching their neighbours about basic nutrition and hygiene. By a happy coincidence, lessons about the importance of hand-washing stimulate demand for Unilever's soap.

Unilever has the advantage that people's preference for soap and shampoo varies much less from place to place than their taste in food. The firm thus spends less time than Nestlé studying local culinary habits, and more time trying to work out the right package sizes and prices—Indian consumers are highly price-sensitive. Paul Polman, Unilever's newish chief executive, recently decided to put the bulk of the company's resources behind growth in its more commoditised product lines.

Nitin Paranjpe, the boss of Hindustan Unilever, sees three big challenges for India's future. The first is corruption, which has become endemic. The second is skills: Indians may be young and energetic, but many are ill-educated; in Bihar, 67% of women are illiterate. And the third is inclusive growth. While growth overall has been impressive, about 400m Indians still live on less than $1.25 a day. As the wealth gap yawns, India risks social strife. But unlike China, India is a democracy, so it has a well-tested way to change governments peacefully. “Democracy and demography are India's big assets,” says Anil Gupta at INSEAD, a business school in France.

Pankaj Ghemawat at IESE, a business school in Barcelona, says one cannot simply assume that Indian consumers in 15 years will be just like Chinese ones today. One big difference is that Indians do not have the same preference for foreign brands that Chinese consumers show. That might change, but then again it might not. When Coca-Cola bought Thums Up, the leading Indian cola, it was planning to kill the brand. But Coke's local managers soon realised Indians preferred Thums Up. The big bosses at head office in Atlanta, who prefer their products to be the same everywhere, were aghast. But Coke now gives Thums Up plenty of shelf space next to its own bottles.