How to add taxonomy in menus?

To answer your question … the ‘good’ way is the way which …

you are most

  1. comfortable with developing,
  2. is easy to maintain going forward, and
  3. solves the problem.

Personally – I prefer flatter taxonomy structures so option 1 …

For Option 2 …. you didn’t say if in the future you would have more 2nd level taxonomies. Currently you only have ‘genres’ in the future would you add ‘year of issue’ or ‘format’.

Either way … always refer to points 1 and 2.