Massive multiple-input-multiple-output (MIMO) is unquestionably a key enabler of the fifth-generation (5G) technology for mobile systems, enabling to meet the high requirements of upcoming mobile broadband services. Physical-layer multicasting refers to a technique for simultaneously serving multiple users, demanding for the same service and sharing the same radio resources, with a single transmission. Massive MIMO systems with multicast communications have been so far studied under the ideal assumption of uncorrelated Rayleigh fading channels. In this work, we consider a practical multicast massive MIMO system over spatially correlated Rayleigh fading channels, investigating the impact of the spatial channel correlation on the favorable propagation, hence on the performance. We propose a subgrouping strategy for the multicast users based on their channel correlation matrices' similarities. The proposed subgrouping approach capitalizes on the spatial correlation to enhance the quality of the channel estimation, and thereby the effectiveness of the precoding. Moreover, we devise a max-min fairness (MMF) power allocation strategy that makes the spectral efficiency (SE) among different multicast subgroups uniform. Lastly, we propose a novel power allocation for uplink (UL) pilot transmission to maximize the SE among the users within the same multicast subgroup. Simulation results show a significant SE gain provided by our user subgrouping and power allocation strategies. Importantly, we show how spatial channel correlation can be exploited to enhance multicast massive MIMO communications.