Your products can be grouped together into categories, known as collections, to make them easier to manage your product range or easier for your customers to discover what you are offering. This allows user to find quickly the right product or choose products with similar characteristics.
Foodly theme has four main collections. They might seem unusual and it is true. Not every food store devides its produt range into Fresh, Frozen, Dryied, Liquid. We did it on purpose because of associations our brain makes when we are trying to remember some food. For example, a user, let's call her Sarah, needs oil but she doesn't know yet which one suits best for her today's dinner. However, she knows that oil is liquid, not dryid or any other state. So we will guide Sarah to right destination where she finds what she needs.
Moreover, as a result of our user testing we discovered that none of users were confused or shocked with this unusual categories vice versa they felt quite comfortable switchig between these categories. It is simple - categories use very easy mental models to help users to find what they are looking for.
Returning to the technical side of collection, we recommend you to read additional manual how to work with collections from Shopify as well.