Not sure what you mean by "file drop down"... but
When you have the Contacts folder open, you should have a button on the
toolbar for "New Contact", "New Contact Group", Import" and "Export". If
you don't see these buttons, the folder template got changed, as it
sometimes does...
Right-click on a blank area of the right pane, and select "Customize this
folder".
In the pull-down box, select "Contacts"
OK
Now you should be able to create a Group, and add contacts to it.
