When you write “assigning individual color to each” what do you mean by “each”, each what? Each bag? Each blanket?
I don’t understand why you thought you needed to use “grouping so I could clone”. Normally one uses components when there will obviously be numerous identical copies. There is nothing about a group that makes it easier to copy than a component, the main difference is that a copy of a group automatically becomes unique if you edit it whereas editing a copy of a component affects all the copies.
If you want each bag or each blanket colored differently than the others, you have no choice but to do them one-by-one. After all, that’s what “differently” means.
But if you want them handled all the same, you can do this:
First, in the outliner expand any instance of KB_x_Sams_Blanket_Packaging. You will see nested contents <Component#2> and Group. Right-click on the Group and choose “make component”. Give the new component a sensible name such as “Bag” (and while you are at it, rename the Component#2 to “Blanket”).
Then explode the nested Groups in both Blanket and Bag Components. The extra level of nesting is not contributing anything useful.
If you check, you will see that these changes affected all instances of KB_x_Sams_Blanket_Packaging. You can now either apply materials to faces inside the Blanket or Bag component to make them affect all instances.
Edit: if you then want certain instances to be different than others, you can select them an make them unique.