Amazon to deliver Whole Foods groceries for Prime members

Amazon (AMZN) is rolling out free two-hour delivery of Whole Foods groceries through its Prime Now service. 

The online retail giant said the grocery delivery service will debut in neighborhoods of Austin, Cincinnati, Dallas and Virginia Beach, although it plans to expand it throughout the U.S. this year. Prime members will receive free two-hour delivery for orders of more than $35, while one-hour delivery is available for $7.99. 

The move comes several months after Amazon bought Whole Foods, a grocer that built a following for its focus on organic and natural foods. In recent years, Whole Foods had come under fire for high prices and odd products like "asparagus water," leading to an out-of-touch image that Amazon has sought to counter by lowering prices. The Whole Foods purchase has heated up Amazon's competition with Walmart (WMT) and Target (TGT), two rivals that also offer grocery sales. 

"We believe Amazon's announcement earlier this morning that it is beginning same day delivery of grocery items in a few existing Prime Now markets is the beginning of the 'unlocking' of the real value of the Whole Foods acquisition," said Moody's lead retail analyst Charlie O'Shea in a statement. 

He added, "In acquiring Whole Foods, Amazon gained a sorely needed brick-and-mortar partner with which to scale its food business, and provided the limited effort announced today is successful, we expect the entire Whole Foods network to ramp up for delivery in due course as well." 

Amazon said shoppers will be able to pick from thousands of Whole Food products for delivery.