One group for the whole catalogue is the default mistake
Everything competes for the same budget with the same assets, so the campaign optimises toward whatever converts most easily — usually your cheapest products and your own brand traffic.
Split by economics, not by category
Margin tier is usually the most useful division, then seasonality, then price band. Category splits feel tidy and rarely change spending behaviour.
Give each group real assets
Thin asset groups get served badly. Headlines, descriptions, images at multiple ratios, and video where you have it — PMax will generate video if you do not supply it, and you will not enjoy the result.
Listing groups do the product filtering
Use custom labels in the feed to fence which products belong to which asset group. That is how you stop a winner funding dead weight. More on fencing PMax in.