You cannot group items in this field because it queries for each item separately when the field is in the report filter area. ...

You cannot group items in this field because it queries for each item separately when the field is in the report filter area.  Drag the field to the report filter area, start the PivotTable and PivotChart Wizard (press ALT+D+P), click Layout, double-click the field in the report filter area, click the Retrieve external data for all report filter field items option, and then try grouping the items again.