While this entire chain of thought seems a bit far fetched, I think the reasoning here is that if you lower the demand for meat, you don’t have to resort to factory farming.
I would hope this happens, but merely having fewer animals alive in factory farming conditions would be a welfare gain from me because I think a factory farmed animal's life falls below the "life is worth living" threshold. YMMV.
When was the last time you saw profitability increase, even remain stagnant, when demand declined?
Let's be real. If demand for meat declines, producers will have to double down on "factories" in order to remain solvent.