Changing an item's category is incredibly simple, and the good news is there are 2 different ways to do it.
Read the following article, or check out the GIF below!
1) In iOS, auto-categorization is enabled as long as categories are enabled. This means that when you type "milk", for instance (or any other item that corresponds to an auto-suggest entry in the search box), it will automatically be categorized as Dairy.
But let's say you want to create a custom category for your item. Well, it's easy than ever to do that, too!
2) While typing in the item, for instance Spaghetti, you can create a category for it in 2 different ways.
The first way is, after typing the item in the search bar, tap the pencil icon (not the check mark). From there, you can assign it whatever category you want.
The second way is, after adding the item to your list, is to tap on the item itself. This will bring up the edit option, and from there you can create your own custom category.