The new menu category will be created, but needs to be filled in order to appear within the Popup Application Menu.
Being filled means that there must be applications included in that category.
A category for an application is designated by that applications .desktop file.
For example, the gnome-boxes .desktop file has:
Categories=GNOME;GTK;System;Development;Emulator;
So if your category name matches any in that list, then clicking that category in the menu editor should show a list of applications that can be displayed in it with checkboxes. Check the boxes for any application you want placed in that category.
If your category name is truly custom, for example "Sheepsleep", then you can see how no applications .desktop file will include that...
But you can add it to the .desktop files Categories line, save the .desktop file, then it can appear.
Categories=GNOME;GTK;System;Development;Emulator;Sheepsleep;