Congrats on reaching that target of high teens margin. What I wanted to ask is what next? I mean is there a plan? Or is there a possibility of going beyond 20% over the next few years? If so, what would be the drivers? And if not, what would constrain us?
Percy, now this is a trick question, obviously. I don't want to get carried away by this, right? So, look, we've always maintained that once -- so the idea is to sustain at this high-teen level, right? And once we are able to establish sustainability at this high-teen level, right, we will figure out what the next set of inflection point is, right? But I would want to believe that in the next couple of years, right, the margin will be range bound, and we just have to focus all our energies into getting back on a sustained P&A double digit, ideally total portfolio double digit.
If you can just explain the up elevators, down elevators for margins? Pernod is making sort of 22% to 23% kind of margins. And sort of we are a direct competitor. We have similar portfolio to them. So, what really prevents us to go to that level, not immediately, but at least over the next few years?
If you look at some of our charts that we have just taken you through, headline pricing has been very, very good for the last 3 years, right? Now having stayed in the company for 8 years, I can say, this comes in peaks and troughs, right? I mean 5 years from 2017 to 2022, we had headline pricing of the average of 0.2% to 0.3%, right? The last 3 years, it's been in the range of 2%, right? So therefore, I don't want to comment, right, in terms of what these numbers will be, right? Like a good organization, absolutely year-on-year, we try and aspire for a marginal margin expansion, which is the leverage growth.
Praveen, you've spent around three months in this new company as the MD and CEO. Your prior experience is in very different industry. So, HT Media, 6.5 years' experience and Pepsi around 20-25 years' experience. How are you finding this industry versus your earlier background, given it's a very, very highly regulated industry? And in FY '26, what are the key improvement areas you have noticed in the first three months? And you mentioned innovations multiple times -- in FY '26, will it be more of engagement with regulators or improving some of the improvement areas you have seen?
Do come from an FMCG background. I believe even though I was in publishing, it was very much a consumer business, okay? Overall, I believe this is a consumer product company with a difference, okay? Let's put it that way. There's legislation on pricing, there's legislation on route to market and legislation on marketing. Once you embrace that reality, you'll learn to work with those. If I may say, at times, it's a handicap versus other FMCGs. But what you do is you build your brands through experientials. And that, to me, is a powerful way of unlocking it. And as you build your brands, you tend to build pricing power. On go forward, I think there were some areas I spoke about. But look, as I say consistently, over the last 3 years, if you see the performance of our business, it's gone from strength-to-strength year-on-year. We'll continue to build on the innovation platforms. We've got some great work over the last 18 months. We'll build on that and sharpen it. We'll continue to reach, as I said, reshape our commercial strategy. We'll not need to replace anything much because things are going on well.
On the U.K. FTA. Finally, after many years, it has been announced, and I do understand FY '27 is the year where it will actually get executed. My specific question is your parent company has already said that fully the prices will be passed to end customer. So here, it will be just the volume uptick, which will happen? How does the consumption change? And in terms of raw material, there will be some benefit again -- are you also saying that even at the raw material side, any benefit happens, that will also be passed on? What portion of the volume gets benefited?
This is something that we have been consistently conveying over the last 2 to 3 years, right? So, you won't get any different response this time, which is that reduction of duty from 150% to 75% will typically lead to about high single-digit reduction in consumer prices. And you're absolutely right. We -- not just we, my sense is that the government will also insist that we pass on the pricing benefit to the consumer, and we are absolutely of the same view that we would want to pass on this benefit completely to the consumer. And therefore, keeping the consumer spent constant, it's reasonable to assume that in this part of the portfolio, a high single-digit additional volume growth should occur, right? So that's on the BIO and BII portfolio. On the BII because it's a lesser component of the benefit, right? So, the price reduction might be slightly lesser than high single digit. My sense is it will be in the range of 4% to 5%, right?
9% plus P&A volume growth ex of Karnataka and Andhra, will it be below 4% kind of volume growth? And if you could talk about Karnataka, the tax cuts, how has that helped? And has it fully already benefited?
In terms of total value, absolutely. Yes, in terms of total value, right, our overall growth rate is about -- full year is about 8.2%, right? And Andhra has contributed about 3.1 percentage to this, right. So, ex Andhra, our NSV growth for the year is about 5.1%. Karnataka, Abneesh, the numbers are immaterial, right? It's such a small salience in the overall pie, right? It's immaterial.
On the innovation bit. I think it was mentioned in the presentation that 2x innovation. I just wanted to understand the nature of this innovation. Do we view this -- is this more likely to be Indian-centered innovation where you're launching more Indian brands? Or it would be still more heavy set on the global portfolio? And in that context, do we expect in order to support this, this 9% to 10% A&P to sales ratio to actually go up in the next 1 or 2 years?
Look, first, I'd say innovation. As I said through the discussion, innovation strategy isn't about only chasing trends. It's about shaping, okay? And it's built on 4 key pillars, if I just want to remind on the -- which is about premiumizing our trademarks, addressing the consumer repertoire, driving occasions and getting pack price to play. Now we will -- it will be both international, our global portfolio, as well as our local trademark. It's going to be through this. And as we look at it, we keep looking at opportunities on how to unlock value, how could we reimagine categories and how do we stay a step ahead of evolving consumer aspirations and a competitive player within that.
On a couple of the numbers that you gave on the P&A side. Growth as far as, one, the Lower Prestige segment is concerned, where 8% is the highest growth, we've seen in 3 years and 11% in the Luxury and Premium portfolio, which is a tad lower than what's been seen in the last couple of years. So, what have been the moving parts there?
So Lower Prestige, I think the Andhra is a big kicker, Harit, right? So, Andhra is a big Lower Prestige market. And as McDowell's has come back into the market, that has provided a fillip, right? So that's one big driver on Lower Prestige. And the top end Luxury plus Premium, 11%. Look, stand-alone, it's very, very healthy, right? If you look at our sources of growth, that segment still contributes to 41% of our value growth, right. So, from a sources of growth perspective, I don't think we've moderated at all, right? But yes, this segment was growing at almost like 25%, 30% 2, 3 years ago. We have discussed some hypotheses around it, repertoire consumption, the post-COVID revenge consumption kind of moderating, right? And a little bit of tailwind that we had when global travel was off from duty free to duty paid, that also moderating. But again, I do want to reemphasize that we don't see anything structurally wrong in terms of Luxury and Premium consumption in India. This is a temporary blip. We believe that another 3, 4 quarters down the line, we should come back to a healthy growth.
I just wanted to get your -- if you could shed some more light on the renewed emphasis on the on-premise channel and this bit here? And also, what will be the initiatives here and maybe even how big the on-premise channel is for you guys?
Too early to say. Clearly, it's to say whether how big the channel is and how big the opportunity is. What we all know, it is a very, very important channel where you can drive sampling and build habit over a period of time. In terms of consumer spaces, as I call it, it's a massive connect platform. And that's where roughly one-third of our business happens. And therefore, clearly, a big area of opportunity. We certainly play that opportunity. As we look at it, we believe we have some opportunity to dial up our play, and that's the focus we'll bring on, on-premise.
Just the last bit on the margin and rather more on the commodity cost environment. If any comments on how things are -- how do you expect the outlook to be in FY '26?
Right now, I would say, by and large, stable, right? It's good to see that. So, it's kind of neutral alcohol spirit. We have started lapping the high prices of prior year. So, in terms of inflation percentage, that has moderated. And on the reverse side, glass, we have started lapping the low prices of prior year, right? So there also, the deflation has kind of gone up to flat levels, right? So therefore, the 2 are kind of neatly squaring off against each other. But can't complain about inflation right now. I think our next inflection point will be somewhere around September, October, when government announces the ethanol fuel blending price-led prices for neutral alcohol spirit, right?
On McDowell's X-series, almost a year since launch, but we haven't -- at least from our channel checks, we are not seeing much of action. Any specific thing over there on vodka, brandy, rum, all 3 segment side? And on the UP market, while it is seen as a very large growth market, a lot of investments from our peer sets, both on the beer as well as on the IMFL side in those markets. But we seem to be lagging in that market.
McDowell's X-series and its rollout. Yes, so its rollout. Look, like in any rollout, it's a slow process in India. Each state is unique, and you need to -- in this category and you need to make sure that you get the legislation and all clearances before you take it to market. We've rolled out to 5 markets already. And if I remember right, we roll out to another 4 markets in the coming couple of quarters. Yes, like in every launch and every innovation, there will be some things which are doing very, very well and some things which are a little slow. And I do know that rum is doing exceedingly well in whichever market we have done. On UP -- UP is a very, very competitive market. For the last few years, we have struggled to really grow our share in that state. And now we're working very hard. We've just recently done a few set. First, the market has opened up. The category has seen opening up. In fact, this -- earlier this month, with the new excise law, pretty much the number of our retail outlet selling spirits has doubled. We've launched double Oak barrel. Recently, it's been around 3 months, and it's getting seeded into the market in UP. We also launched the McDowell's X-series, and it's done reasonably well.